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Sharp increase in freight rates early 2024 may signal an impending surge in goods inflation, according to data from Steno Research.
As we venture into 2024, a sharp spike in international container freight rates suggests an upcoming climb in U.S. goods inflation, potentially disrupting market forecasts. While a significant cutting cycle is anticipated, uncertainty over the inflation trajectory remains unreflected in current market pricing. Analyst Andreas Steno draws a direct line from current shipping costs to future price increases and questions the Fed's next steps.
Critical Observations:
Studies link shipping costs directly to inflation: a doubling in freight rates may boost CPI inflation by 0.7 points. The pandemic's freight cost surge, a 600% jump, eventually passed onto consumer prices, a pattern we may see again.
Not everyone agrees on this outlook. Debates on Twitter reflect a spectrum of opinions. While some urge the Fed to take quick action, others question the reliability of freight rates as an inflation indicator, especially in a market still stabilizing from recent shocks.
The conversation is buzzing with varied perspectives – some users see a strategic opportunity amid potential policy errors, while others doubt whether inflation will indeed follow suit. The uncertainty of the times adds to the complexity of predicting the Fed's response.
Source: Andreas Steno/X | Stenoresearch.com | CEPR.org
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