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The Personal Consumption Expenditures Price Index (PCE), the U.S. Federal Reserve’s preferred measure of inflation, ratcheted up 6.4 percent in February, year on year, the PCE’s largest annual gain since 1982, the U.S. commerce department reported.

The index registered 6.0 percent in January.

Food costs rose 1.4 percent in February, the fastest climb in two years; energy jumped 3.7 percent, the sharpest monthly gain since October.

Setting aside the always-volatile prices of energy and food, the index was up 5.4 percent on the year.

The war in Ukraine has rocketed inflation higher and faster but did not begin until 24 February when the measuring period was almost over.

Since the war began, gasoline prices had reached a national average of $4.24 a gallon as of 30 March, 63 cents higher than a month earlier, according to data website Statista.

Consumer spending grew by just 0.2 percent in February, compared to a 2.7-percent jump in January. 

Factoring out inflation, consumers actually spent 0.4 percent less in February, indicating inflation is leading shoppers to pinch pennies.

At the same time, overall incomes rose 0.5 percent in February, month to month, with wages and salaries adding 0.8 percent, the most since October.

The Fed expects the PCE’s inflation rate will be 4.3 percent at the end of this year but has indicated it will raise interest rates to about 2 percent by the end of this year—not enough to tame inflation unless inflation tames itself in the meantime.

The outlook for price increase had worsened significantly, Fed chair Jerome Powell said in an assessment made before Russia invaded Ukraine.

The war and resulting sanctions have driven inflation even higher and faster since.

TREND FORECAST: In “ECB Economist Does a 180 on Inflation” (22 Feb 2022), we diagnosed Powell’s condition as “Central Bankster Syndrome,” marked by the compulsion to see soaring prices as “temporary” or “transitory” until long after inflation has rampaged through the economy unchecked.

At his December 2020 press conference,  Powell pointed to “disinflationary pressures around the globe” and said “it’s not going to be easy to have inflation move up.”

A month later, with inflation on the move well above the Fed’s 2-percent target rate, Powell said it was only “temporary.”

In July, with inflation running at 5 percent, Powell told a Congressional committee that “we really do believe that these things will come down of their own accord as the economy reopens,” he noted. 

Treasury secretary Janet Yellin echoed his mistaken view in a 24 October CNN interview, describing high inflation as “temporary” (“Powell, Yellin Agree: Higher Inflation Ahead,” 26 Oct 2021). 

While Powell was waiting for inflation to give up and go away, we documented its relentless rise in “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.

Given that history, it is not surprising that the Fed would raise interest rates only to 2 percent by the end of this year when inflation already is running at four times that pace. However, with the Ukraine War wild card dealt and inflation spiking, the 3 percent inflation hike is in the cards. 

It should also be noted that according to the International Monetary Fund, to keep inflation from rising, interest rates should be one percent above the inflation rate. Considering the U.S. inflation rate at 7.9 percent, interest rates should be around 9 percent. 

TREND FORECAST: Incremental interest rate hikes this year will do little to restrain inflation, especially should the Ukraine war and the attendant sanctions continue.

While the central bank worries about interest rate shocks rattling the economy, inflation will continue to shake it to its foundation if interest rates are not rapidly raised. 

However, when they are, public and private debt burdens will greatly increase, equity markets will slump into bear territory and the economy will fall into recession. 


In March, prices rose 7.5 percent, year on year, across the Eurozone, according to a flash report from Eurostat, the European Commission’s (EC’s) statistics agency, almost four times the European Central Bank’s target rate of 2 percent.

The rate was the highest since the Eurozone was created in 1999 and soundly beat both February’s 5.9-percent rate and analysts’ forecasts of 6.6 percent.

It was the fourth consecutive month of record inflation as the Ukraine war drove the region’s oil and gas prices to record highs, Eurostat reported.

The highest rates were in Lithuania with 15.6 percent, Estonia at 14.8 percent, and the Netherlands’ 11.9 percent.

Energy prices rocketed 44.7 percent year over year, unprocessed food 7.8 percent, overall food 5 percent, and services 2.7 percent.

Russia’s war in Ukraine and resulting sanctions have added a broad “supply shock” to Europe’s economy, Christine Lagarde, president of the European Central Bank, said.

The war and resulting sanctions have cut off key portions of the world’s supply of grains and fertilizer. Wheat prices have jumped 21 percent since Russia’s invasion, barley 33 percent, and fertilizers as much as 40 percent.

Shippers are having difficulty moving grain out of the war zone and fears are growing that Ukraine will be unable to plant next fall’s harvest, the Financial Times reported.

“Inflation keeps coming in stronger than all the forecasters have expected,” Jack Allen-Reynolds told The Wall Street Journal.

“That implies an even bigger hit to household incomes and possibly to consumption,” he said.

The EC’s index of consumer sentiment sank as the Ukraine war went on, falling 5.4 points last month to a negative 108.5, its lowest in a year, as consumers feared the war and resulting sanctions would further destroy purchasing power and push the zone’s economy closer to recession.

Also, the European Central Bank (ECB) has revised its inflation outlook for 2022 from 3.1 percent it predicted in December to 5.1 percent now. The rate could be higher if energy prices rise more than the bank assumes, officials said.

Still, ECB president Christine Lagarde said on 30 March that she expects energy and food prices to stabilize at high levels, helping the continent to avoid a combination of rising costs and a shrinking economy, which defines our Top 2022 Trend of Dragflation.

Investors are increasing their bets that the European Central Bank will be forced to raise interest rates to zero by the end of this year from the -0.50 percent where they have sat since 2014. 

Yields on the benchmark German 10-year bond reached 0.7 percent on 30 March, its highest since 2018.

PUBLISHER’S NOTE: The European Central Bank’s (ECB’s) refusal to raise interest rates—especially now that Europe’s unemployment rate has reached a record low of 6.8 percent, according to European Commission figures—is nothing less than malpractice.

Especially now that the Ukraine war, the resulting sanctions, and the inevitable aftermath will drive inflation hard for months to come, the bank should be raising interest rates steadily, as the U.S. Federal Reserve has begun doing.

TREND FORECAST: The ECB will be forced to begin raising rates this year but the bank will struggle to find the “neutral rate” at which inflation slows but the region’s economy does not.

However, because of the huge disparity between the bank’s current -0.50 interest rate and inflation’s 7.5-percent page, there is no neutral rate to be found. And, it is pure hypocrisy that the ECB, which for a decade said that when inflation hit their 2 percent mark, they would raise rates, has not raised them. 

Indeed, as with the U.S. and Japan Banksters, the Euro Gang have kept interest rates artificially low to artificially pump up their sagging economy. 

Thus, the ECB will raise its rate, but so incrementally that it will have virtually no effect on the record inflation. 


Inflation in Germany in March rose to 7.6 percent, year over year, its most dramatic jump since 1982, the Financial Times reported, and up markedly from 5.5 percent in February.

The chief culprit was a 39.5-percent spike in energy costs, the country’s Federal Statistics Office said.

“A similarly high inflation rate in Germany was last recorded in autumn 1981 when mineral oil prices had sharply increased as a consequence of the Iran-Iraq war,” the office said in a statement announcing the March numbers.

The German government’s council of economic advisors has cut its 2022 growth forecast from 4.6 percent this year to 1.8 percent and raised its expectation for inflation from 2.6 percent to 6.1 percent this year.

“The outlook for the economy in Germany and the euro area has worsened sharply,” the group said.

Germany receives 55 percent of its natural gas supply from Russia. Although Russian gas deliveries to Europe have not been sanctioned, those imports are now under threat, especially as Russia now demands payment for the gas in rubles (see related story in this issue).

If Russia cuts off its deliveries of natural gas to Europe, the country faces a “substantial” risk of a recession and inflation could climb to 9 percent, the group warned.

Due in large part to the war and its sanctions, “this will not be the end of accelerating inflation,” ING analyst Carsten Brzeski told the Financial Times.

“The only way is up and double-digit numbers cannot be excluded,” he warned.

Germany’s supermarkets have seen incidences of panic buying of flour, sunflower oil, and other staples, The New York Times reported.

Spain’s inflation shot to 9.8 percent last month, rising from 7.8 percent in February and passing analysts’ expectations.

TREND FORECAST: The government’s chief economic advisers have cut their outlook for Germany’s growth by more than half while more than doubling their expectations for inflation’s pace, with sanctions against Russian exports as the latest aggravating factor.

Barring unforeseeable events or massive government intervention in national economies, Germany is likely to lead Europe’s economy over the threshold of a recession no later than the end of this year.


In last year’s final quarter, wages in Europe rose 1.5 percent as inflation galloped at 4.6 percent, cutting household purchasing power by the most in 14 years.

However, by February, Europe’s jobless rate fell to a record low 6.8 percent, the European Commission reported. Workers were ready to press for higher wages, strengthening their paychecks  against the 5.9-percent inflation that marked the month.

Then Russia invaded Ukraine.

The war and resulting sanctions have helped drive inflation to 7.5 percent in March. Governments are mulling plans to ration fuel; manufacturers and their workers face the prospect of production shutdowns.

Meanwhile, the price of everything from gasoline to pet food continues to climb as the European Central Bank refuses to budge from its long-held negative interest rate.

“In the context of mounting growth headwinds—including supply-side disruptions and record high commodity prices but also China’s zero-COVID strategy—unions are likely to scale back their wage demands as corporate margins are bound to take a notable hit,” Allianz senior economist Katharina Utermöhl told the Financial Times

Since the invasion, Germany’s union of chemical workers agreed to put off contract negotiations for a month.

“Every collective bargaining round is blown up,” Michael Vassiliadis, president of the union encompassing 580,000 German chemical, mining, and industrial energy workers, said to the FT.

Last month, car makers BMW and Volkswagen sent workers home as they ran out of parts that were being made in Ukraine. Last week, German truck maker MAN furloughed 11,000 workers on 80-percent pay after the supply of wiring harnesses from Ukraine dried up.

German companies’ plans to hire workers crumpled to their worst outlook since May 2021, according to a study by the Ifo Institute economic think tank.

“Especially under these circumstances, nominal wages won’t grow like prices,” Enzo Weber, chief researcher at Germany’s Institute for Employment Research, said to the FT.

“This means that we will have real wage losses in 2022,” he added.

To cushion households and businesses, Germany’s government has approved €4.5 billion in tax relief and other European governments also have pledged billions to offset higher energy bills.

TREND FORECAST: As the war drags on and inflation rampages, it will be harder for European governments to convince citizens to “stay the course” with sanctions on Russian exports as the price for halting Russian aggression toward Europe. We forecast a strong rise in nationalist, anti-immigration, anti-establishment political movements. 


Draconian lockdowns to halt the spread of a resurgent Omicron virus shrank China’s manufacturing and services economies in March, government figures show.

The worst outbreaks occurred in cities that account for about 30 percent of China’s GDP, Goldman Sachs said.

The 25 million residents of Shanghai, China’s most populous city and the world’s busiest port, entered a severe lockdown on 1 April. The measures were scheduled to be lifted 5 April.

Although the government maintains its 5.5-percent growth target for this year, according to a statement last week by premier Li Keqiang, many economists see that goal as increasingly unrealistic, The Wall Street Journal said.

The purchasing managers index (PMI) for China’s manufacturing sector slipped to 49.5 last month from 50.2 in February, as predicted by economists.

Readings below 50 indicate contraction; the lower the reading, the deeper the loss.

Before March, China’s factory output had expanded for four consecutive months.

Now there may be worse times ahead: the index of new export orders sagged to 47.2 last month from 49.0 in February.

The contraction could have been worse without emergency measures instituted by some employers; Foxconn, the electronics assembly giant, kept workers overnight in dormitories during lockdowns so they could continue to work their shifts.

The PMI for China’s non-manufacturing economy slipped from 51.6 in February to 48.4 in March, also sinking into contraction.

TREND FORECAST: As China’s economy goes, so goes the world?

Much of the global economy has come to depend on China’s manufacturing sector both as a customer for raw materials and as a supplier of consumer and industrial goods. Indeed, to precipitate sales growth, many businesses need to sell their products to the massive Chinese consumer market. 

Should China continue with their Zero COVID policy and continue its lockdowns, their slowdown will push the world’s economy further toward recession.


During the first three months of this year, China’s CSI Composite stock index, which includes the largest listed companies in Shanghai and Shenzhen, gave up 15 percent of its value.

The 500 stocks in the separate Shenzhen Component Index lost 18 percent.

For both indexes, it was the worst quarter since the third period of 2015.

The Shanghai Composite Index, which includes large and less-volatile state-owned companies, surrendered 11 percent for the quarter.

Corporate output, profits, and consumer confidence have all suffered from rolling lockdowns, often severe, as the government has attempted to quell a new outbreak of the Omicron virus.

At the same time, the Ukraine war has driven commodity prices even higher, raising producers’ costs and consumer prices, discouraging discretionary spending.

Also, the country’s weakened property sector has not fully recovered from its earlier troubles, despite government intervention to shore up property values.

Responding to China’s troubles, foreign investors sold $7.1 billion worth of Chinese mainland stocks in March, the third largest monthly withdrawal since foreign investments were permitted in 2014.

TREND FORECAST: As we have noted there are growing concerns regarding the geopolitical risks surrounding investments in China which have grown since Russia invaded Ukraine. 

Also, while China has grown closer to its Asian neighbors, there are increasing tensions between U.S/NATO and China for its refusal to condemn Russia’s invasion of Ukraine. 

And even before the Ukraine War, we monitored China’s wobbly property market in “China’s Real Estate Market Teeters on Evergrande Debt” (21 Sep 2021) and “China’s Real Estate Troubles Ripple Across Emerging Markets” (26 Oct 2021), among other articles.


One of the few places in the world where the U.S. dollar is not growing stronger is Latin America.

The dollar has risen in value this year against 31 of 41 of the world’s chief currencies. 

However, at the same time, Brazil’s real has gained 16 percent on the buck, making it the world’s best-performing currency during this year’s first quarter.

Chile’s and Uruguay’s pesos have strengthened by 9.4 and 7.4 percent, respectively, against the greenback and Mexico’s peso has claimed 2 percent greater value.

Two factors account for the currencies’ success, according to The Wall Street Journal.

First, many countries’ economies south of the U.S. are resource-based. Brazil exports timber, Argentina ships wheat, and many countries are key sources of oil and minerals.

Soaring commodity prices have given those countries cash windfalls.

Second, many Latin American countries’ central banks have been quick to raise interest rates when inflation reared, tamping down price increases while also creating a positive return for investors.

The banks’ quick response to inflation shows a fiscal discipline that has often been absent in the past, analysts told the WSJ.

Brazil’s benchmark rate now stands at 11.75 percent, Argentina’s at a whopping 44.5 percent, as we reported in “Argentina’s Interest Rate Hits 44.5 Percent” (29 Mar 2022). Chile’s base rate has jumped 5 percentage points since last July.

In those cases, investors sell currencies showing lower returns or less of a chance of rising interest rates, buy local currencies, and invest the cash in local assets that will provide a yield greater than the rate of inflation.

Partly as a result, the Bovespa stock index in Brazil, Chile’s IPSA, and Mexico’s IPA are three of the four best-performing stock indexes in the world this year, The New York Times said, growing by 13.3, 14.6, and 4.5 percent, respectively as of the end of March.

TREND FORECAST: There are signs those good times may have peaked. Investment returns in emerging markets have tended to droop when China’s economy slows—which it is—or when the U.S. Federal Reserve raises its interest rate, both of which have happened recently. 

Also, investors historically have sold out of riskier investments during uncertain times and sheltered their money in dollars and other investments known for stability... such as precious metals.

1 Comment
  1. […] in Spain ran at 9.8 percent last month, the fastest since 1984, as we reported in “Eurozone Inflation Sets All-Time Record in March” (5 Apr […]

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