The Good side of Inflation

The CPI print is clear, inflation is coming slowly, but at the top end of this range it can always pause a bit [base effects], but it should be a trend given the dollar trend. But that should mean higher interest rates? But the FED and RBI are now committed to another year of low-interest rates irrespective. That means negative real interest rates for the rest of the year. That means falling currencies and explains the weak INR. That should be bullish for all the usual suspects, inflation plays.

Now RBI has moved toward using its balance sheet and this chart will continue to come back to us as it goes exponential like in other parts of the world.

Domestic inflation however just saw its first uptick. This was a good period to keep rates down, and we can stay the course till it does not go out of control. -2% real interest rates should be bearable. Not for savers of course

All that brings us back to this chart. the commodity cycle. The Bloomberg commodity index. The wave count right or wrong the important part from theory here is that prices often bottom near the bottom of the previous bear market, [called the 4th wave in EW], and the 2020 bottom was right there. This is why it may be an important long-term bottom. The next move higher can be an impulse or X wave in both cases it will be sizeable if it is even a 50% retracement. I am working with the idea that it is a new impulsive move higher back to new all-time highs in the next few years.