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The Personal Consumption Expenditures Price Index, the U.S. Federal Reserve’s preferred measure of inflation, sped along this year through March at 6.6 percent, the U.S. Bureau of Economic Analysis reported.

Food and energy costs were particularly inflated, due in large measure to the Ukraine war and Western sanctions.

Stripping out food and energy prices, the index still rose 5.2 percent for the year so far.

The month-to-month gain in the overall index was 0.3 percent, slightly slower than in March. 

Last year, price increases were driven largely by a shortage of goods, The Wall Street Journal noted. 

Now, however, service prices also are inflating, which embeds inflation more deeply into the economy and makes it harder to contain.

Employee compensation during this year’s first quarter grew by 1.4 percent, the U.S. labor department said, less than a quarter of the rate at which prices rose.

Rising wages tends to add more pressure to inflation, because consumers have more cash in their pockets to spend.

“We have had an expectation that inflation would peak around this time and then would come down,” U.S. Federal Reserve chair Jerome Powell said in a public statement late last month.

“These expectations have been disappointed in the past,” he noted.

TRENDPOST: The Fed was woefully late to recognize inflation’s danger to the economy and its long-term post-COVID recovery. We have documented the Fed’s blindness in “The Powell Push: For Better or Worse” (7 Dec 2021), “Inflation Tsunami Approaching” (4 May 2021), “Inflation Soon to Get Much Worse” (18 May 2021), “Fed Officials Send Mixed Signals on Policy Shift” (29 Jun 2021), “When Will Fed End Cheap Money Policy?” (27 Jul 2021) and in many of our “Market Overview” sections.

Now the Fed has two choices: jack up rates quickly, which would guarantee a recession, or raise rates more slowly, which would let inflation sink roots into the economy and be much harder to eradicate.

We have no confidence that this Fed, or any central bank, has the skills needed to raise rates high enough fast enough to stymie inflation without crashing the economy.  

Historically, a recession has been needed to halt inflation moving at such a high rate of speed. We believe the same is true now. 


In a 29 April paper, the European Central Bank (ECB) acknowledged it has persistently underestimated inflation’s pace and strength.

The bank’s forecasts were flummoxed by higher-than-expected energy prices, continuing supply chain snarls, and a post-COVID recovery that was stronger than expected, the paper explained.

In its own defense, the ECB noted that “international institutions and private forecasters have recently made similar large errors” and the bank’s track record in forecasting inflation rates was not particularly worse than that of the Bank of England or the U.S. Federal Reserve.

Those two institutions have raised interest rates in the face of runaway inflation, while the ECB has not.

The bank has learned from its miscalculations and tweaked its models, it said, but warned that the Ukraine war and Western sanctions mean that inflation will “remain very challenging to forecast in the near term.”

The ECB’s inflation predictions were so consistently wrong that they drew criticism from the bank’s own officials.

The bank’s worst mistake came in December, when it forecast an inflation pace of 4.1 percent in this year’s first quarter. 

Instead, prices rocketed up 6.1 percent year on year, including a gain of 7.4 percent in March.

In April, the zone’s prices increased 7.5 percent, with Germany’s jumping by 7.8 percent.

Inflation so startled Sweden’s central bank that it recently raised its key interest rate above zero, something it had vowed not to do until 2024. 

However, inflation’s peak is now “very close” and its pace will slacken during the second half of this year, according to a public statement last week by Luis de Guindos, ECB vice-president.

PUBLISHER’S NOTE: Pardon us for being unwilling to trust the ECB’s prediction that inflation is about to peak. After it has admitted being consistently wrong for a long time, the ECB’s inflation forecasts have lost all credibility.

The ECB has a chronic case of Central Bankster Syndrome: waiting to raise interest rates for fear of damaging economic growth while inflation rages at a record pace, damaging economic growth.

We will wait for data to believe that this is inflation’s peak.

TREND FORECAST: We stand by the prediction we made in “Euro Sinks as ECB Holds Interest Rate at -0.50 Percent” (26 Apr 2022) that the ECB will raise interest rates this year but it has waited too long. Its rate hikes will be too small and too gradual to matter to inflation. 

The region’s economy will sink into our Top 2022 Trend of Dragflation, with prices rising and economic activity declining, in part due to the ECB’s failure to act in time.


A protracted war in Ukraine could cause a 37-percent spike in global food prices and could drive hundreds of millions of people into poverty and malnutrition, World Bank president David Malpass said in a BBC interview last week.

The world’s poorest will “eat less and have less money for anything else such as schooling,” he said. “It’s a human catastrophe, meaning nutrition goes down,” he added. 

“But then it also becomes a political challenge for governments who can’t do anything about it. They didn’t cause it and they see the prices going up,” Malpass also noted.

Soybeans’ price has jumped 27 percent this year, with futures contracts trading around $17 a bushel, a price not seen since 2012, largely because of Brazil’s drought and searing temperatures. 

On 28 April, corn futures surpassed $8 a bushel for the first time in ten years and settled at $8.13 on 2 May, more than twice as costly as before the COVID War.

Food prices climbed 31 percent last year and will rocket up another 23 percent this year, the World Bank has predicted.

Instead of subsidizing domestic crop production or imposing price caps, countries should focus efforts on making more fertilizer, finding ways to ship food where the need is greatest, and giving targeted assistance in the most acute emergencies, Malpass urged.

The food crisis also fuels a looming debt debacle.

“This is a very real prospect,” he said. “As many as 60 percent of the poorest countries are either in debt distress right now or at high risk of being in debt distress,” he said. “We don’t know how far it’ll go.

“The best thing to do is to start early to act early on finding ways to reduce the debt burden for countries that have unsustainable debt,” he noted. “The longer you put it off, the worse it is.”

Rich countries told emerging economies not to worry about borrowing in order to help suppress the COVID outbreak, according to Bloomberg, and now both rich and poor countries are wondering if these record debts will need to be written off. 

China is now owed about as much as Western lenders combined, Malpass pointed out.

China has “different rules,” he said. “For example, contracts have non-disclosure clauses, meaning you can’t share the terms with other people [and] that makes it very hard to restructure those debts.”

China has also made loans to nations that have put up parts of their infrastructure, mineral deposits, or resources as security. When Sri Lanka was unable to repay a debt to China last year, China took over the country’s main port.

TREND FORECAST: With inflation and shortages of goods showing no sign of easing, many nations will have no choice but to default on their debts. Before they do, several countries will face our Top 2021 Trend of New World Disorder, including street protests and political turmoil as populations rise up against shrinking public services and subsidies. 

This “debt bomb” is another factor that weights the global economy toward slowdown, recession, and Dragflation.


Unilever, the global consumer goods conglomerate that counts Dove soap, Vaseline salves, and Ben & Jerry’s Ice Cream among its 400 brands, raised its prices an average of 8.3 percent in this year’s first quarter.

Sales revenue grew 7.3 percent, but that was entirely due to the higher prices, CEO Alan Jope told a press briefing. The actual volume of goods sold slipped 1 percent.

Prices for home care products such as bleach and cleanser shot up 12.5 percent, cutting sales volume 2.9 percent; personal care products such as soap and shampoo climbed 7.4 percent.

The company’s commodity costs have doubled or, in some cases, tripled since 2020, Jope said. “We are in uncharted territory” regarding pricing and volumes, he added.

Competitors such as Procter & Gamble also have raised prices but have managed to maintain sales volumes.

However, Unilever is “more exposed to certain elements of commodity inflation than a number of our peers are,” CFO Graeme Pitkethy said in the briefing, and praised the company for not losing more sales volume than it did.

Unilever expects to see another €4.8 billion of cost inflation this year but still believes its operating margin will remain between 16 and 17 percent in 2022.

The company made three bids to buy drugmaker GlaxoSmithKline late in 2021, which raised shareholders’ ire and prompted activist investor Nelson Peltz to take a stake in Unilever, as we reported in “Trian Buys Into Unilever” (1 Feb 2022).


McDonald’s U.S. restaurants raised menu prices an average of 8 percent last quarter, compared to a year earlier, the company said, raising the dollar value of the quarter’s sales by 3.5 percent.

The burger chain is struggling to balance rising commodity costs with customers’ ability and willingness to pay while remaining a good value, especially for low-income customers, CEO Chris Kempczinski said in comments quoted by The Wall Street Journal.

Some diners are opting for lower-priced menu items or buying less food for their meals, some franchisees told the company.

The U.S. customer count is down about 1 percent year on year, in part because many of the restaurants have kept the shortened hours that marked the COVID era.

Labor costs have added 10 percent, year on year, and input costs will balloon by 12 to 14 percent this year, Kempczinski said.

Same-store global sales grew 11.8 percent during the quarter, giving the company $1.1 billion in net income, down 28 percent from the same period a year earlier.

McDonald’s also swallowed $127 million in costs involved in closing its Russian outlets after the country invaded Ukraine.

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