Does the Fed look at inflation numbers within individual industries and metro regions?
Here's what I'm worried about: if you look at historical examples like say the 1970s inflation, or the post-Cold-War Warsaw Pact hyperinflations, or the post WW-2 hyperinflations in many European countries, prices didn't rise uniformly. Some industry or some region would experience very large inflation, and then eventually it would get transmitted to that industry's customers, or their suppliers. It's basically a network contagion, spread across the links in the economy.
We're seeing the early stages of this happen right now - that's what the article is about.
Powell's public comments are that "inflation doesn't turn on a dime" and "we're likely to see some localized price increases within certain industries, but no generalized inflation." The thing is - I know from history that the former can be false (particularly in wartime, and shifts from a controlled to a market economy, and the recovery from COVID has aspects of both), and the latter tells me that he's looking at the same data that I am but drawing the opposite conclusion. If 5% of firms are experiencing 30% inflation and the rest are experiencing no inflation, the PPI will read 1.5%. If that 30% inflation is in a core industry though (say food, or energy, or labor) and they pass it along to all their customers, then within 1-2 years you could have 30% inflation across the whole economy without passing through the 2% stage.
It's giving me COVID tingles from last year, where in March your overall risk of getting COVID in the U.S. was about 1:100,000, but your risk in NYC was 30%. Then suddenly your risk in Phoenix was 40%, and your risk in South Dakota was 50%, and then your risk in LA was 30%, and suddenly about 20% of the country has had it.
Poke holes in my reasoning, please.