The rate of increase in container freight is slowing, suggesting that pressure on some elements of the supply chain may be easing. This supports the view of temporary inflation.
Of course, freight rates have not fallen, but to create sustained upward inflationary pressure, freight rates have to rise steadily, which is not the case. The five-week average increase in the WCI composite container freight benchmark index has slowed to about 1.4 percent. More than 6 percent in July.
The market also expects inflation to rise in the near term, but temporarily, in line with the Fed. Inflation swaps and break-even inflation in the US suggest that investors expect inflation to fall. The chart below shows that inflation is expected to be above 3% in a year's time, but is expected to fall back to 2% in a few years.
Us inflation swap indicators show that inflation expectations fall over time.
As the global recovery switches between acceleration and deceleration, a short period of stress relief is also crucial. For now, those moments of stress relief may help to get out of trouble more quickly.