[UncleOxidant]

We'll find out in a couple of quarters or so if this inflation is "sticky" or just a temporary result of the pandemic. My feeling is that it's mostly the latter, but it's important to note that there were already inflationary trends in play prior to the pandemic - the push to return more manufacturing to the US and the resulting trade wars, for example, were going to lead to some inflation. If this inflation proves to be "sticky" like the 70s/early 80's inflation then we're likely to see some relatively high mortgage rates for a bit. Probably not as high as they were in the early 80s, though.

[adam_arthur]

We'll see. I was pretty sold on the transitory belief earlier, and while I believe there are transitory components, like car prices, I expect core/wage inflation to continue.

We had an almost 9% annualized wage gain last month using the MoM numbers. Unemployment is too low right now for core inflation pressures to abate, unless we have a recession or similar drop off in employment IMO. I think a lot of these core economic principles were forgotten due to how high unemployment went after GFC and how long it took to reach full employment once again.

It looks to me like we've entered a wage price spiral... but certainly it could play out in a number of ways. Perhaps the Fed will use falling nominal CPI YoY numbers to hide the structural inflation that has developed. That could keep rates artificially suppressed for another year, if they're able to convince markets of it.

Due to base effects, CPI is likely to peak either in Feb or March. But it would be premature to extrapolate a fall from 7 to 6%, for example, as evidence that structural inflation hasn't taken hold.

I expect inflation to persist around 4-5% longer term, absent intervention by the Fed... which still brings us to 6-7% mortgage rates.