We all know that it is dangerous for investors to think and say “this time is different”. But once in a long while things can and do play out very differently from their historical patterns.
This Alpine Macro chart shows that core PCE inflaiton only falls during or after the economy goes through a recession when unemployment rate has soared, but “this time is different”: inflation has already plunged even when the economy has been running at full employment.
There is a near obsession in the financial community to relate inflation outlook to the U.S. labor market. This is a mistake. Falling inflation this time around has not been predicated on a weak labor market, suggesting other forces have dominated the disinflation process.
Those who predict a Fed-induced recession are resting their case on the typical pattern of a normal business cycle. They could be right but I am not convinced: if they were right, inflation would still have been rising based on the experience, no?