Will the US be heading for a soft or hard landing? - Part 4

We've stated very clearly that the US would be facing a hard landing in our 1st post and the latest economic statistics corroborated our projection.

Let's begin by taking a look at the latest CPI.

The latest April CPI (yoy) was 8.3% which eased slightly from the previous 8.5% (March).  However, the monthly core CPI had increased to 0.6% in April.  Actually, the latest statistics didn't bode well for the US economy and showed that the US inflation was becoming entrenched and structural.  Structural inflation means inflation is no longer caused by monetary policies but by exogenous factors.  The year-on-year change eased because the low base effect from the previous year had diminished but the yearly decline didn't fall significantly and the monthly change in the core CPI had increased instead.

Let's take a look at the CPI breakdown.

We can see from the graph below that the US inflation is hitting the consumers hard in the following sectors.

Food costs have also risen fast and furious in the US.

What are the high inflation impacts on the US economy?

The high inflation has caused the US personal saving rate to drop below the mean.

The low personal saving rate has forced Americans to resort to increasing their credits to maintain their existing lifestyles.

The rising Fed rates have also caused the mortgage rates to rise significantly from the previous year.

The recent 2 Fed hikes have caused the Michigan consumer sentiment to fall to the lowest level in over 1 year.

However, the current Fed rates are still too low to contain the high inflation and must be increased significantly.

If the Fed really hikes its rate to 5%, the mortgage rate will be around 9-10% because it is at least 4% above the fed rate and the high mortgage rate will cause a housing crisis in the US again.  Therefore, the US FED has lost the confidence to engineer a soft landing and a hard landing is likely to materialize.