LONDON, Aug. 11 (Reuters Breakingviews) – US inflation for the year to July remained stuck at a 13-year-old 5.4%. What is almost as remarkable is how difficult it is to predict this number. The median forecast of economists polled by Reuters turned out to be too low when last month’s data was released on Wednesday, making it the longest run of unbroken underestimates in at least 15 years. In addition, the failures of April and June were among the most significant of this period.
Pandemic distortions have resulted in surprisingly large increases for items like used cars and trucks. Prices for these vehicles rose only 0.2% between June and July, far from the monthly jump of 10.5% recorded in June, but were nonetheless more than 40% higher than a year earlier. .
Part of the explanation may also lie in the confidence economists have in Federal Reserve Chairman Jerome Powell’s assurances that high inflation is transitory. They may, for example, underestimate the duration of supply chain disruptions. The high price of inflation-linked bonds suggests that investors are buying insurance in case the Fed and forecasters get it wrong. (By Swaha Pattanaik)
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Editing by Richard Beales and Amanda Gomez
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