Why high inflation is a rear-view mirror issue: explained in 10 charts

For many months now, I have been calling out June 2022 as the peak in the US’ current high inflation cycle, and that significantly lower inflation lies ahead. My confidence in such an outlook stemmed from the initial stagnation in the M2 money supply, which has now turned into outright DECLINES.

I view this as the single most important indicator that will drive inflation and the economy over 2022.

With the absolute level of the M2 money supply not moving since December 2021, the impact on CPI inflation has already become apparent. Its impact will only continue to grow. Let’s illustrate this through a bunch of additional charts:

A tale of two halves: MoM inflation rates have tanked

As can be seen in the chart below, while CPI inflation was growing at a VERY fast pace during 1H22, inflation was practically non-existent in 2H22.

The annualised 6-month change in the CPI was 13.0% in June 2022. Today? Just 0.3%.

So much for inflation being “sticky”.