{"id":618816,"date":"2026-06-15T01:00:00","date_gmt":"2026-06-15T01:00:00","guid":{"rendered":"https:\/\/buglecall.org\/?p=618816"},"modified":"2026-06-15T01:00:00","modified_gmt":"2026-06-15T01:00:00","slug":"the-inflation-sht-is-hitting-the-fan","status":"publish","type":"post","link":"https:\/\/buglecall.org\/?p=618816","title":{"rendered":"The Inflation Sh*t Is Hitting The Fan"},"content":{"rendered":"

The Inflation Sh*t Is Hitting The Fan <\/span><\/p>\n

\n

Submitted by QTR’s Fringe Finance<\/a><\/em><\/p>\n

This week was proof that the inflation story that markets desperately want to go away refuses to cooperate. It also adds to the case that\u00a0new Fed chair Kevin Warsh could have his hands tied<\/a>\u00a0\u2014 and may ultimately need to\u00a0redefine inflation to untie them<\/a>.<\/p>\n

This week the Bureau of Labor Statistics reported another\u00a0really ugly\u00a0<\/em>wholesale inflation print, adding to a growing pile of evidence that inflation pressures are proving far more persistent than policymakers, economists, and investors had hoped.<\/p>\n

The Producer Price Index rose 1.1% in May, well above economist expectations of 0.7%. On a year-over-year basis, wholesale inflation accelerated to 6.5%, the highest reading since November 2022.<\/p>\n

\"\"<\/a><\/p>\n

Even though core PPI, which excludes food and energy, came in slightly below expectations at 0.4% versus estimates of 0.5%, that distinction shouldn\u2019t provide much comfort. The headline figure remains extraordinarily elevated, and businesses are still dealing with rising costs that eventually work their way through supply chains and into consumer prices. CNBC reported:<\/p>\n

\n

Most of the acceleration in the PPI \u2014 nearly 80% \u2014 came from a 2.8% surge in final demand goods prices,\u00a0the biggest increase ever in a data series going back to December 2009.<\/strong>\u00a0In turn, 80% of that increase came from a 10.7% jump in energy.<\/p>\n<\/blockquote>\n

Zero Hedge\u00a0posted the following chart on X<\/a>\u00a0showing the jump:<\/p>\n

\"\"<\/a><\/p>\n

Economist Peter Schiff\u00a0noted on X<\/a>:<\/p>\n

\n

Producer prices spiked 1.1% in May, following a downwardly revised 1.1% rise in April.\u00a0That’s back-to-back months of 14% annualized increases.<\/strong>\u00a0So far in 2026, the PPI is already up 4%. If this pace continues, it will rise 10% in 2026, matching the 2021 gain, the most since 1980.<\/p>\n<\/blockquote>\n

PPI is often viewed as a leading indicator for future inflation because it measures costs before they reach consumers. When businesses face higher input costs, those costs rarely disappear into some magical accounting black hole. They generally get passed along. Companies can absorb some pain for a while, but eventually somebody pays the bill. Historically, that somebody is the consumer.<\/p>\n

The significance of today\u2019s report extends beyond a single monthly data point. It comes on the heels of yesterday\u2019s CPI report, which showed inflation accelerating once again. The Consumer Price Index rose 0.5% during the month,\u00a0pushing annual inflation to 4.2%.<\/strong>\u00a0While both figures matched economist expectations, that hardly qualifies as good news.<\/p>\n

In fact, inflation has now climbed above 4% for the first time in three years and sits at its highest level since April 2023. Personally I\u2019m not sure how it could be made any clearer to the market that rates are going to have to hold steady or move higher than being\u00a0nowhere f*cking near\u00a0<\/em>the Fed\u2019s 2% \u201ctarget\u201d.<\/p>\n

\"\"<\/a><\/p>\n

But markets seem determined to celebrate inflation reports whenever they merely meet expectations. However, there is a difference between meeting forecasts and solving inflation. The Federal Reserve\u2019s target remains 2%. Inflation is currently running at 4.2%. That isn\u2019t victory.\u00a0It\u2019s more than double the Fed\u2019s target.<\/strong><\/p>\n

Taken together, yesterday\u2019s CPI report and today\u2019s PPI report paint a picture that should make rate-cut enthusiasts increasingly uncomfortable.\u00a0Consumer inflation is accelerating. Wholesale inflation is accelerating.<\/strong>\u00a0Energy prices are pushing higher. And the broad disinflation narrative that markets spent the better part of the last year embracing is showing signs of breaking down.<\/p>\n

Last month, I\u00a0argued that<\/a>\u00a0markets were underestimating how quickly the conversation could shift from rate cuts to rate hikes. At the time, that seemed like an aggressive position. Most investors were still operating under the assumption that inflation would continue drifting lower, growth would soften in an orderly fashion, and the Fed would eventually ride in with rate cuts to keep the party going.<\/p>\n

That assumption looks considerably shakier today. And every inflation report that comes in hot further limits the Federal Reserve\u2019s options.<\/p>\n

At best, this data supports a case for keeping rates elevated for significantly longer than markets would like. At worst, it supports a growing argument that the next move from the Federal Reserve may not be lower rates at all\u2026it may be higher.<\/p>\n

That possibility still sounds absurd to many investors because markets have spent years conditioning themselves to expect monetary accommodation whenever conditions become uncomfortable. Somewhere along the way, investors became convinced that central banking was supposed to function like a customer service call center for the S&P 500.<\/p>\n

Stocks down? Cut rates. Economy slowing? Cut rates. Credit markets stressed? Cut rates. Investors sad about the death of their pet goldfish? Cut rates. Octogenarian billionaires\u00a0complaining about flatulence<\/a>\u00a0that investments are giving them? Cut rates.<\/p>\n

\"\"<\/a><\/p>\n

Unfortunately for that crowd, inflation doesn\u2019t particularly care about market expectations, portfolio allocations, or CNBC panel discussions about why six cuts are definitely coming next year.<\/p>\n

The Fed can tolerate slower growth. It can tolerate weaker sentiment. It can tolerate hedge fund managers with gas and anchors\u00a0nearly shitting themselves<\/a>\u00a0on financial television.\u00a0What it cannot tolerate indefinitely is inflation running more than double its target while wholesale prices reaccelerate to levels not seen in years.<\/strong><\/p>\n

And that\u2019s where this vice grip keeps tightening. This market is already facing a half-dozen serious roadblocks and questions that all investors should know about. I wrote about them earlier this week and it\u2019s a free read here<\/a>.<\/p>\n

Now, every hot inflation report removes another degree of freedom from policymakers. Every upside surprise forces markets to reconsider assumptions about lower rates, easier financial conditions, and endless liquidity. Every month that inflation remains elevated increases the probability that \u201chigher for longer\u201d eventually becomes \u201chigher still.\u201d<\/p>\n

That\u2019s bad news for an economy that has spent the better part of fifteen years becoming addicted to cheap money.<\/p>\n

\n

\ud83d\udd25 80% Off If You Subscribe Today.\u00a0<\/strong>This coupon allows for 80% off of annual subscriptions and results in a 85%\u00a0savings over paying the monthly rate for a subscription to the blog<\/strong>.\u00a0You keep the discounted rate for as long as you wish to remain a subscriber.:\u00a0Get 80% off forever<\/a><\/p>\n

\n

Higher rates don\u2019t simply affect stock valuations. They tighten financial conditions across the entire economy. They pressure borrowers. They increase refinancing risk. They squeeze commercial real estate. They stress private credit. They raise funding costs. They expose leverage that only works when money is cheap. The longer rates stay elevated, the tighter that grip becomes.<\/p>\n

Yesterday\u2019s CPI report showed inflation running at 4.2%, the highest level in more than three years. Today\u2019s PPI report showed wholesale inflation running at 6.5%, the highest level since late 2022.<\/p>\n

Neither report supports the case for imminent rate cuts. Together, they strongly support the opposite conclusion.\u00a0At a minimum, they reinforce the argument that rates cannot be cut anytime soon without the Fed risking what little inflation-fighting credibility it has left.<\/strong>\u00a0At the extreme, they strengthen the case that policymakers may eventually have to consider raising rates again.<\/p>\n

That is a conversation markets still seem remarkably unwilling to have. Instead, investors continue behaving like a rate-cut rescue package is just one meeting away. Every soft data point gets interpreted as bullish because it means cuts are coming. Every strong data point gets interpreted as bullish because growth is resilient. Somehow every possible outcome leads to the exact same conclusion: buy more stocks.<\/p>\n

It\u2019s a fascinating intellectual framework. Unfortunately, inflation data has a nasty habit of ruining good stories. We\u2019re already operating in territory that would have sounded ridiculous a decade ago. Inflation remains far above target. Interest rates are sitting near multi-decade highs. Government debt continues exploding. Asset prices remain historically elevated. Consumers are increasingly stretched. Credit markets are showing signs of strain. Yet markets continue acting as though the return of free money is some sort of natural law.<\/p>\n

The reality is that the bill for years of monetary excess \u2014 and\u00a0Janet Yellen\u2019s massive super-genius brainpower<\/a>\u00a0\u2014 is still arriving.<\/p>\n

\n

At her final news conference as Fed chair Wednesday,\u00a0Yellen<\/a>\u00a0said the Fed\u2019s failure to bring inflation up to the central bank\u2019s 2 percent mandate is her single disappointment.<\/p>\n

\u201cWe have a 2 percent symmetric inflation objective. For a number of years now, inflation has been running under 2 percent, and I consider it an important priority to make sure that inflation doesn\u2019t chronically undershoot our 2 percent objective,\u201d she said.<\/p>\n<\/blockquote>\n

The unprecedented situation we\u2019re in isn\u2019t stabilizing. It\u2019s becoming more unstable. The vice grip on the economy and financial markets is tightening one data point at a time. The screws turn a little further with every inflation report that refuses to cooperate, every producer-price surprise, every CPI release that reminds everyone that inflation never actually went away\u2014it merely stopped accelerating for a while.<\/p>\n

The uncomfortable truth is that policymakers spent years trying to convince everyone there was a painless exit from the biggest monetary experiment in modern history. Now they\u2019re discovering the same thing everyone else eventually discovers and the thing that Austrian economists have been screaming from rooftops:\u00a0there are no painless exits, only delayed consequences.<\/strong><\/p>\n

Now read:<\/em><\/p>\n