Regular readers of the Hotline know that we forecast the decline in inflation from last summer’s 9.2% high – ahead of much of the rest of the crowd. It’s not because we are clairvoyant but because we believe the best forward-looking indicator of future inflation is the commodity price index, aka the CRB index.

Check out the chart below. You can see why we saw inflation falling from last summer’s high water mark as commodity prices sank. But look at what has happened with commodity prices over the past month. They are the highest since last summer. This is despite 11 Fed rate hikes over the past 14 months and is not at all consistent with pushing inflation down to the 2% Fed inflation target.

The best way to bring inflation down is not to raise interest rates – which hurt the economy – but to cut government spending by $1 or $2 trillion – which helps the economy.