Affordability Is About Current Prices

Stephen Roach: “Affordability is about the price level, not the rate of change of prices. Disinflation, or a decelerating rate of change in inflation is a good thing, especially for inflation-targeting central banks. But even in a disinflation, prices keep rising, providing no relief to the fundamental problem of pocket-book distress known as affordability.”

“Moreover, with the lagged impacts of tariffs now largely responsible for most of the reacceleration of headline CPI inflation from the April low of 2.3% to the latest reading of 3.0% in pre-shutdown September, the price-level affordability issue is once again going from bad to worse. And these pressures are likely to persist, with further tariff-related increases still in the pipeline.”