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Thoughts on inflation’s rapid march

January 13, 2022, 11:57 AM UTC

Good morning.

Inflation was the unavoidable story of the day yesterday, with the U.S. reporting consumer prices in December up 7% from a year earlier. That’s the fastest increase since 1982. And here’s a fun fact to think about: mortgage rates in 1982 averaged 16%, compared to just over 3% today. That’s because Mr. Market apparently thinks current high inflation won’t last.

But price increases have certainly become widespread throughout the economy—with new vehicle prices up 11.8%, the gasoline powering those vehicles up 58%, the cost of dining out up 7-8%, meat prices up 15-20%, and so on. I wrote on Tuesday about the risk of inflation leading to more aggressive Fed action leading to an end to the economic party, and asked CEO Daily readers to send in their thoughts. Genpact CEO Tiger Tyagarajan offered the following:

Inflation is as real as I have ever seen it in my 35-year career. It is global and seems to be pervasive across industry sectors and skill sets. I am seeing it in every client conversation at the C suite level, and it does have a cascading effect. And finally, it has an element of expectation, as we all know. I worry that the expectation of inflation may itself drive inflation.”

That’s the key lesson I learned from my macroeconomics professor—former Fed chief Janet Yellen—when I was in graduate school at the London School of Economics during the last great inflationary surge. Inflation, at the end of the day, is a psychological phenomenon. Right now, the market is telling us that price increases haven’t yet fully infected people’s thinking about the future. But once they do, watch out.

More news below.

Alan Murray


Meta antitrust

A federal judge has given the FTC permission to take Meta/Facebook to court over alleged antitrust abuses. It's second time lucky for the agency, after a court last year blocked its suit over a lack of detail. For Meta, the case could theoretically lead to it having to sell off Instagram and/or WhatsApp. Fortune

U.S. cloud

In the first of what may be over 100 such decisions, Austria's data-protection watchdog said a local website publisher broke the GDPR privacy law by using Google Analytics, because it couldn't guarantee users' personal data would be safe from U.S. surveillance. The upshot could be a massive disincentive for European companies and organizations to use American cloud services. Fortune

Rate rises

A senior Fed official has backed the idea of more than three rate rises this year, if inflation merits them. Philadelphia's Patrick Harker said the above-mentioned 7% y.o.y. jump was "very high, very bad." (Bonus read: Fortune's Megan Leonhardt on how the "Willy Wonka of Medina, Ohio" has had to increase candy prices by 12%.) Financial Times

Booster pushback

The pushback against excessive COVID boosters continues. This time it's the European Medicines Agency (and the World Health Organization) arguing that four vaccine doses are unnecessary for most people, and trying to top up every several months could even lead to "problems with immune response." Fortune


Tesla gap

Electric vehicle manufacturers that aren't Tesla are falling further and further behind Elon Musk's operation. As Fortune's Christiaan Hetzner explains in this analysis: "Until Elon Musk came around, [the big German brands] set the benchmark in automotive innovation for the well-heeled car buyer. Now all they can do is play catch-up." (Bonus read: Musk says "a lot of challenges with the government" in India are holding up its plans there.) Fortune

Boris Johnson

The premiership of the U.K.'s Boris Johnson is in more danger than ever before, after he apologized to lawmakers and the country for attending a drinks party in the garden of No. 10 Downing Street in May 2020, during a severe national lockdown. Not helping Johnson: his claim that he thought the party was "a work event". Fortune

Coinbase recharge

The cryptocurrency exchange Coinbase has given its workers four weeks of "deliberate recharge time" this year, in an attempt to stave off burnout. The policy is not guaranteed to be repeated next year. Fortune

Ghost flights

The European low-cost airline Ryanair is attacking Lufthansa after the German flag-carrier said it would run 18,000 flights empty flights this and next month, purely to keep its lucrative slots at regional hubs. Lufthansa wants the EU's "use it or lose it" rule softened; Ryanair and the European Commission (unlikely allies to say the least) say big airlines have all the flexibility they need. Politico

This edition of CEO Daily was edited by David Meyer.

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