Inflation Risk Is Subsiding Rapidly

2025-04-18 09:47:00 ET

Summary

• Inflation is solely a function of supply and demand, the ongoing reversal of monetary liquidity is continuing to erode economic activity.
• When discussing inflation risk, consumer activity drives inflationary pulses in the economy.
• The most significant risk to the economy is not the return of inflation risks but rather the collapse in consumer confidence that leads to a recession.

Inflation risk has been a significant topic of discussion in the mainstream media for the last few years. Such is unsurprising given that inflation spiked following the pandemic in 2020 as consumer spending (demand) was shot into overdrive from stimulus payments and production (supply) was shuttered. To understand why that occurred, we need to revisit “Economics 101.” ...

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