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Here is my take on the early inflation metrics for April. I feel as though I have been shouting into the wind for several months about the deflationary trends that are upon us—as opposed to the worries about resurgent inflation we keep hearing from smart economists and the Fed.

The outgoing administration during its final months juiced its already enormous spending that had long supported GDP and jobs growth. This contributed to the spike in inflation metrics in October-January, with CPI/PPI hitting +3.00%/+3.65% YoY in January, and pushed the budget deficit to $1.3 trillion for the first half of fiscal year 2025 (10/1/24-9/30/25), marking the second-highest six-month deficit on record, which was exacerbated by surging interest payments on surging debt.

Then the new administration came in with the lofty but earnest goal of fixing our unsustainable death spiral of inflation, debt, deficit spending, offshoring, and hyper-financialization. Well, it's so far, so good on the inflation front, which has been falling for the past 3 months, with all March readings back below 3%, and the new April readings falling even further.

As shown in the upper chart below, April CPI and PPI came in at +2.33% and +2.41% YoY, and the real-time blockchain-based Truflation (which historically presages CPI) is at +1.79% today. The middle chart shows the rolling 3-month annualized rates (which I like to follow for a better read on the current trend), which came in at just +1.56% and -0.08% (yes, negative). It is evident that PPI is the most volatile, but the resumption in the downtrend is clear. The third chart shows the correlation among CPI, PPI, and the Global Supply Chain Pressure Index (GSCPI). GSCPI remains subdued, in negative territory (i.e., below its long-term average), which bodes well.

But in my view, maintaining somewhat elevated inflation above 2% might be appropriate to help reduce the giant federal debt by “inflating it away” as part of a 3-prong approach comprising: 1) elevated inflation in the 2.5% range, 2) cost cutting, particularly rooting out waste and fraud, and 3) robust real economic growth through fiscal & monetary policies that foster organic private sector growth (rather than continued overreliance on inefficient government)—leading to gains in productivity, margins, earnings, jobs, wages, GDP, and ultimately tax receipts.

And by the way, here's my take on the impact of tariffs: 1) tariffs are a tax, 2) taxes are deflationary, 3) ipso facto, tariffs are deflationary (in the absence of a commensurate increase in income).

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