Inflation fantasies

Daily update

US October consumer price inflation is due. The element of guesswork in calculating inflation has risen recently. That is compounded by the absence of data from October 2025 to use in comparison (the legacy of the 2025 government shutdown is still felt). Consumers are likely to perceive inflation as being higher than reported, given the undue importance placed on high-frequency purchases.
The inflation from the Gulf war has had the bad manners to appear just as the inflation from tariffs was falling out of the consumer price calculations. This has been the story since the pandemic—four temporary inflation shocks following one another in quick succession. The fact that there have been no second-round inflation effects (in particular, no wage-price spiral), in spite of the appearance of continuous inflation, argues against a structural inflation bias.
US President Trump’s reiteration of a very low chance of strikes against Iran has helped to keep oil prices low. The prospect of US Defense Secretary Hegseth facing impeachment may encourage further investor speculation. If Hegseth were to be a scapegoat for the war, it might make a diplomatic solution easier.
There are a number of central bank speakers on the agenda—Waller from the US and Lane from Europe are probably the most notable.