March 2023 inflation in the US has fallen more than expected in March by 1% to 5.0% pa. It was widely anticipated that inflation would fall to 5.2% pa. This is a two-year low but do not be fooled, core inflation for food, property etc remains higher at 5.6%, it is energy prices that have fallen. Combined with unemployment falling i.e., more people are employed and have money in their pockets, inflation may remain higher.
Many are speculating that inflation will fall dramatically now reducing pressure on the Federal Reserve to pause further interest rate rises although we suggest that higher employment may push core inflation higher as Americans have more money to spend.
In addition, we have suggested many times that 5% pa average inflation over a 10-year period will likely be the target, despite the recent energy crisis pushing inflation up to 9-10% pa, because all governments need inflation to devalue government borrowing that paid for covid-19 and lockdown. 5% pa inflation over 10 years is a cumulative 60% over 10 years. This would mean that government fixed rate debt will be devalued 60% over 10 years and then with target inflation at 2.0% pa over the following 10 years will mean that governments covid-19 debt will be devalued by over 80% over 20 years before it is due to be repaid in 20-30 years.