On May 10^th, we noted in Forbes telling us that the high inflation rate might not drop as quickly as some had forecast:

Inflation May Fall Slower Than Expected

by Chuck Jones | Monday, May 9, 2022 | 8:45 AM EDT

The rapid rise in inflation is causing the Federal Reserve to aggressively raise interest rates along with deleveraging its $8.9 trillion balance sheet. This has thrown stocks into correction territory or bear markets. Two of the major reasons for the increase in inflation have been the upsurge in demand coming out of the pandemic and supply chain issues.

April’s CPI estimate will be announced Wednesday before the stock markets open. Expectations are for the all items rate to drop from 8.5% to 8.1%. To hit 8.1% the month-to-month inflation rate will have to fall from 2.3% in January, 2.6% in February and 3.8% in March to no more than 1.25% to hit the expected number.

“Expectations,” were not met. Not only did the May inflation rate not drop to 8.1%, not only did it not even remain steady, but the rate rose slightly, to 8.6%.

Energy prices rose 32% on an annualized basis in March. In April Gasoline and Diesel prices were fairly flat, which will help lead to a lower inflation increase since they comprise about 4% of the inflation CPI Index and were up 48.2% year-over-year in March. However, natural gas prices increased in April, which will somewhat offset gasoline’s impact.

Well, guess what actually happened. From The Wall Street Journal:

U.S. Inflation Hits New Four-Decade High of 9.1%

Prices up broadly across the economy, with gasoline far outpacing other categories

by Gabriel T Rubin | Wednesday, July 13, 2022 | 12:08 PM EDT

U.S. consumer inflation rose last month from the year before at the highest rate in more than four decades, as prices climbed throughout the economy.

The consumer-price index rose 9.1% in the 12 months ended in June, the fastest pace since November 1981, the Labor Department said on Wednesday. The June increase also eclipsed May’s 8.6% rate, which led Federal Reserve officials to shift to a faster pace of benchmark interest-rate increases in its campaign to bring down inflation.

The report likely keeps the Fed on track to raise its benchmark interest rate by 0.75 percentage point at its meeting later this month. Stocks dropped and bond yields jumped following the inflation report.

Core prices, which exclude volatile food and energy components, increased by 5.9% in June from a year earlier, slightly less than May’s 6.0% gain, the Labor Department said.

There’s more at the original, but as I’ve asked before: why are “volatile food and energy components” excluded from the core inflation rate. Food and energy, in the form of gasoline and utility bills, have to be purchased every month, often several times a month. You see it when you fill your gasoline tank, and you see it when you go to the grocery store, and you see it when you get your electric and natural gas bills. Economics reporter for The New York Times noted that:

Gas prices rose 11.2% in June alone, and are up nearly 60% from a year earlier. Grocery prices were up 1% in June (a bit slower than in May) and were up 12.2% from a year earlier.

And:

One big reason “core” inflation accelerated in June: Rents rose 0.8% in June, the fastest one-month gain since 1986. “Owner’s equivalent rent,” the BLS’s (confusing) way of accounting for owner-occupied housing, is also picking up. Over the past three months, rents have risen at an annual rate of 8.2%. (Owner’s equivalent rent rising at 7.3% rate.) That’s especially worrying because rents don’t tend to turn around quickly.

You know what has happened? Virtually every single projection of the economic “experts,” or at least the great majority of them, has been wrong.

Back to the Journal:

Despite June’s inflation reading, economists point to recent developments that could subdue price pressures in the coming months.

Investor expectations of slowing economic growth world-wide have led to a decline in commodity prices in recent weeks, including for oil, copper, wheat and corn, after those prices rose sharply following the Russian invasion of Ukraine. Retailers have warned of the need to discount goods, especially apparel and home goods, that are out of sync with customer preferences as spending shifts to services and away from goods, and consumers spend down elevated savings.

“There’s a pretty serious recession fear affecting a broad range of asset prices,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives.

Retailers’ ability to shed unwanted inventory could test whether pricing is returning to prepandemic patterns, Ms. Rosner-Warburton said. Some retailers, such as Target, have already said they are planning big discounts. Others with robust warehouse capacity, such as Walmart Inc., could be more likely to hold on to their excess inventory, analysts say.

The first guesstimate of second quarter Gross Domestic Product figures is scheduled to be released on Thursday, July 28^th, with a second, supposedly more refined guesstimate on THursday, August 25^th. GDP decreased by 1.6% in the first quarter — the initial guesstimate was -1.4% — so if the figures show any negative reading at all, we will officially be in a recession. The second quarter already being over, there’s no time to change things.

I’m old enough to remember the last heavy inflation cycle, 1974-1982, and, after years of President Ford’s Whip Inflation Now buttons, and President Carter’s “malaise,” inflation was tamed the old-fashioned way: with a deep recession.

This isn’t 1982: inflation is not (yet) being accompanied by serious unemployment, but that’s in part due to people who should be working or looking for jobs still being paid, with phony money, not to work.

I’m not some fancy economics professional, and don’t have a PhD to my name. BUt it seems to me that things are going to get worse before they get better. The fer-mongers are attempting to scare us with dire warnings about the BA.5 Omicron sub-variant, and while those warnings are not being taken too seriously by the public in general, there’s at least the possibility that the warnings will be reasonably accurate. The Fed has been raising interest rates in an attempt to depress consumer demand, to fight inflation, but if they foul that up, such interest rate hikes could hasten a recession. Ukraine, the breadbasket of Europe, has seen its wheat crop and exports devastated by the war, and the economic restrictions put on Russian gas and oil, though they haven’t hurt Russia yet, could really mess things up in Europe, especially when winter arrives.

My wife is more worried about the economy than I am, and she’s pretty smart — smart enough to have married me, anyway! — but I am concerned enough. Perhaps it’s unfair to place all of the blame on President Biden, but hey, you know that he’ll take the credit for any good news; we might as well lay the responsibility for bad news at his stinky feet.