We learned last week officially that “Bidenflation” has fallen fast this year to now 3%. But the lingering effects of the 2021-22 inflation liftoff are still being felt every day: products and services are today about 16% more expensive than when Trump left office. Inflation is a tax on savers and those living on fixed incomes, so the damage has been done and will last a long time – even if the Fed is successful and gets inflation back near its 2% target, which is still an open question.
It wasn’t just the politicians, Nobel Prize-winning economists, and the Fed money experts who got the inflation story dead wrong. This chart from the WSJ shows that investors and market forecasters also got surprised by the burst of rising prices. The derivative markets and the bond market were predicting inflation of about 3 to 4.5% and instead, the rate hit 9% last summer and averaged more than 6% for the year.
Why was everyone in the market fooled? Our guess is that few on Wall Street thought the Biden adminis