Analyst Daryl Jones: Inflation Is Already Roaring Back

While some economists continue to say that inflation isn’t a threat now, analyst Daryl Jones says that’s not true.

The government has incentive to underestimate inflation, because the consumer price index (CPI) is used to determine outlays for 48 million people on social security, 22 million on food stamps and 4 million civil service retirees, says Jones, managing director of risk management at research firm Hedgeye.

Policymakers tend to focus on “core” inflation, which excludes food and energy. But food and energy purchases make up 36 percent of the average consumer's budget, Jones points out in Fortune magazine.

“The Fed's inflation graph might look nice and smooth, but it's probably not the best indicator for how your wallet feels when paying bills or buying groceries.”

Many argue that inflation can’t accelerate in a sluggish economy.

But “primarily due to aggressively accommodative monetary policy in the United States and around the globe, we believe inflation is here, and poised to accelerate as all the slack in global economies begins to tighten,” Jones writes.

“Measures of inflation for major nations around the globe give support to our conclusions: Most of the G-20 nations are reporting higher than normal inflation rates.”

Not everyone agrees with Jones.

“Inflation is certainly no imminent threat to the U.S. economy,” David Resler, chief economist at Nomura Securities International, told Bloomberg.

“It ties in with the Fed’s statement. We see the Fed on hold through this year.”