The limbo persists

Up 10%, down 10% - the crude oil price is moving like a freshly oiled snake. Unfortunately the inflation that's coming as a consequence of the Iran war will not be so whip-like.

May's inflation in the US is certainly going to be higher than the 3.5% in March. The Personal Consumption Expenditure (PCE) index of inflation, the Federal Reserve's preferred measure, is headed higher. An alternative measure, the Consumer Price Index (CPI), could reach more than 8% in the US. Gas prices have doubled since the outbreak of war. Americans have spent $24 billion more since March this year driving their cars than for the same period in 2025.

According to a Gallup opinion poll, a 'record' 55% of Americans now say their 'financial situation is getting worse'. United Airlines has put up its ticket prices by as much as 20%.

In 2025 the average inflation rate worldwide was more than 4%/year.

History repeats

The S&P 500 index is trading at record levels and other US market indexes are also high. Investors are still enthralled by the AI revolution, a critical element of the US and Israeli attacks.

It's feeling rather like a repeat. Five years ago, when CPI inflation rose from 1.5% in April to 5.4% by December, the Federal Reserve was slow to act. Its chairman, Jerome Powell, took to calling the inflation surge 'transitory'.

By June 2022 US inflation hit 9.1%/year, when the Federal Funds rate was just 1.5%-1.75%. In the final quarter of 2021 the profits of S&P 500 companies grew by some 22% year-on-year. In Q1 of this year the same index is likely to show a 28% profit.

Given that the Mid East war has knocked out around a third of the world supply of helium (crucial for high-tech uses), ethylene (key in plastics production) and urea (a vital nitrogen fertilizer) we are probably living in a delusion - that inflation again is 'transitory'. The ethylene shortage is already causing problems in Asia.

The Eurozone's latest quarterly survey of professional forecasters said inflation will be an average of 2.7% this year but swiftly return to 2% next year; that's the target of not only the European Central Bank (ECB) but many other central banks too. Norway's central bank evidently doesn't think the coming inflationary wave will be transitory. It raised interest rates this week and is expected to push them higher.

Kevin's trick

The new chairman of the US Federal Reserve looks like he is going to redefine inflation. That may please President Trump, a persistent proponent of lower interest rates. "The data that's being used to judge inflation is quite imperfect...What I'm interested in is what's the underlying inflation rate" said Warsh during his confirmation hearing. That's good - we all want to know what real inflation is.

However, Warsh seems to prefer the 'trimmed mean', which is an alternative measure of core or underlying inflation. The trimmed mean cuts the most extreme observations from the top and the bottom of the list of items. Once the highest and lowest price rise is trimmed from the list, you have what is thought to be a more accurate picture of where inflation really is. Trimmed lists of goods and services prices tend to register lower rates of inflation and could suggest lower interest rates. That would help gain Presidential approval.

But...one obvious downside of this trick, using a new measurement of inflation, is that it might simply be used to shift the goal posts, given that inflation has been above the Fed's 2% PCE target for five years. At the very least it will be a challenge for the public, which will have to re-educate itself. It may be that the Fed's new boss accepts the 2% target needs relaxing. Perhaps 4% will become the new, unspoken inflation target.

No matter what changes might happen, inflation is guaranteed to cut the purchasing power of your fiat cash. If you want to surrender your assets to politicians and central bankers, keep using fiat money. But if you want to protect what you have, then start using gold as money with Glint. Inflation might be 4% or higher this year; it's all guesswork, as is what deal might be struck to end the war. Gold fights the guesswork.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

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