Helena Lyng Blak
10 weeks ago

Financial analyst: Americans suffer from “vibeflation”

If the US wants lower inflation, they need to cut rates, says one financial analyst.
Man looking at receipts.
Denys Kurbatov / Shutterstock.com

Based on a paper published by the US National Bureau of Economic Research, financial analyst Ulrik Simmelholt is arguing in Steno Research that American consumers are suffering from “vibeflation”, a term describing the way the average consumer might perceive durable goods, mortgages, and vehicles to be more costly than they are due to high interest rates.

“If Jerome Powell wants lower inflation then cutting rates will feed into people’s perception of buying conditions and automatically lower living costs,” he states. “This is admittedly almost an Erdoganish’ logic, but the idea is not 100% without merit.”

He goes on to explain: “After the change in methodology to the CPI basket in 1983, interest rates aren’t reflected to the same extent as before in the inflation basket. But that also means that Americans feel rising costs of living to a larger extent than the CPI basket reflects.”

“Surveyed Americans’ perception of buying conditions for real estate, vehicles and large household durables still remain low, most likely due to the cocktail of inflation and rising elevated interest rates on financing those durables.”

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