Issue 1 · Late October 2026
Inflation by economy and US core inflation. Each number compares the indicator only with its own past: the share of past months it is higher than; 50 is normal. For prices and rates, what is compared is how far the reading is from its own 10-year average: 100 means the furthest from that average, not necessarily a record price or rate.
This issue
Combined, the 2 indicators in this category stand at 50 neutral.
No indicator here is at a historical extreme this issue.
Where each stands: US inflation 64 (warm) and Core inflation 35 (cool).
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
Where it stands now
The category combined
Each month we take the median of the indicators’ positions, going back to 1967. Higher = prices rising faster.
coldcoolneutralwarmhotHatched = earlier periods that were also neutral
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every neutral month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
Bars: median cumulative changeEarlier months with Prices neutral, excluding the current period (154)All months (707)
Median of the deepest drop below the starting month within the next 5 years: −6.6% for months with Prices neutral; −6.9% for all months.
“US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
1967–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
Supply pressuretoUS inflationCommon explanation: Knock-on · same direction
Clogged supply chains and higher freight costs make goods cost more
This issue: Supply pressure at 91 (hot), US inflation at 64 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.45 · in step in 14 of 14 5-year periods
US inflationtoFed funds rateCommon explanation: Cause · same direction
When inflation is above target, the central bank raises rates to cool demand
This issue: US inflation at 64 (warm), Fed funds rate at 72 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.53 · in step in 37 of 48 5-year periods
OiltoUS inflationCommon explanation: Knock-on · same direction
Energy is part of consumer prices and a cost of transport and production
This issue: Oil at 72 (warm), US inflation at 64 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.53 · in step in 38 of 42 5-year periods
US inflationtoPolicy ratesCommon explanation: Cause · same direction
When a country’s inflation is above target, its central bank raises rates
This issue: US inflation at 64 (warm), Policy rates at 85 (hot) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.54 · in step in 14 of 14 5-year periods
Core inflationtoFed funds rateCommon explanation: Cause · same direction
The Fed’s 2% target is set for overall prices, but it uses core inflation, which excludes food and energy, to judge the trend
This issue: Core inflation at 35 (cool), Fed funds rate at 72 (warm) — Core inflation below normal, Fed funds rate above normal, not in line with the common explanation.
Weak or inconsistentAgreement +0.65 · in step in 31 of 44 5-year periods
Natural gastoUS inflationCommon explanation: Knock-on · same direction
Natural gas drives electricity and heating bills (most clearly in Europe)
This issue: Natural gas at 60 (warm), US inflation at 64 (warm) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.39 · in step in 25 of 42 5-year periods
Food pricestoUS inflationCommon explanation: Knock-on · same direction
Food prices push up food inflation (food weighs heavily in emerging economies)
This issue: Food prices at 61 (warm), US inflation at 64 (warm) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.32 · in step in 26 of 42 5-year periods
WagestoCore inflationCommon explanation: Knock-on · same direction
Services rely mostly on labor, so wages push up service prices
This issue: Wages at 22 (cool), Core inflation at 35 (cool) — both below normal, in line with the common explanation.
Weak or inconsistentAgreement +0.46 · in step in 22 of 37 5-year periods