Inflation's stall isn't a seasonal fluke

Financial commentators spent the opening months of 2024 attributing sticky inflation prints to residual January seasonal noise and contract resetting quirks. That soothing thesis was shattered by the February core PCE price index, which advanced at an annualized rate of 2.8 per cent. Disinflation has not experienced a seasonal blip; it has stalled against a wall of structural persistence.

Persistence over Seasonality

Non-housing service costs and domestic wages continue to compound at rates incompatible with the Federal Reserve's two per cent mandate. With consumer spending remaining resilient and financial conditions extraordinarily loose, corporations retain sufficient pricing power to pass through input costs. The final leg of the inflation journey is proving to be a protracted siege rather than an immaculate retreat.

Attributing inflation persistence to seasonal adjustment noise was a convenient market delusion; price growth has stalled because aggregate demand remains insulated from monetary policy.