Issue 19 – The Inflation Rate Turned in April, but Still Remains High

Since the beginning of the year, financial conditions have tightened significantly. The DXY is up 9.9%, interest rates are up 75 bps, 10-year bond yields are up 135 bps, and BAA credit spreads are up 125 bps, while the S&P 500 is down 850 points. Given that financial conditions are transmitted to the economy through changes in the money supply, it shouldn’t be a surprise that the growth of that supply is rapidly slowing down. In the 4 months ended April, the U.S. money supply increased only at an annual rate of 4.5%, compared to 25% in 2020 and 10% in 2021. Moreover, the yearly increase in the world money supply, expressed in USD, is now flat, decelerating to a negative annual rate of 13.5% in the last 3 months. Consequently, prints on real economic activity have either lost momentum or not met consensus, while yearly increases in consumer, producer and import prices have turned downwards as supply-chain snafus are slowly unwinding. The NY Fed’s Underlying Inflation Gauge (UIG) – an index that captures sustained movements in inflation from information contained in a broad set of price, real activity, and financial data – also looks as if it may have peaked in April.


Follow us on: LinkedIn


By Hubert Marleau

Continue Reading in PDF

By Hubert Marleau

All products and services of Palos Wealth Management Inc and Palos Management Inc. are only available for sale to residents of Canada, unless the laws of a foreign jurisdiction permit sales to its residents. The contents of this site should not be considered an offer to sell or a solicitation to buy products or services to any person in a jurisdiction where such offer or solicitation is considered unlawful.