Paul Krugman Sees Inflation Uptick In Tuesday's Print: 'Whether It's Actually Good Or Bad News Will Depend On...'

As investors and traders await the crucial consumer price index report due on Tuesday, Nobel laureate and economist Paul Krugman believes there will be an uptick in inflation and that the economy is still running hot.

"The key point: Some of the temporary factors that were holding inflation down, especially falling used car prices, are probably over. On the other side, official shelter prices are still rising fast, even though market rents are probably falling, because of known lags," Krugman tweeted.

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Price Action: Last week, major Wall Street indices closed in the red as market participants weighed in mixed signals pertaining to inflation. Hawkish comments from Federal Reserve officials, too, impacted sentiments.

The SPDR S&P 500 ETF Trust SPY lost 0.43%, while the Invesco QQQ Trust Series 1 QQQ fell 1.23%.

"So we’ll get headlines about inflation rising, especially given the BLS change in seasonal adjustment. But whether it’s actually good or bad news will depend on the details — and may be very hard to discern," Krugman said.

Krugman's baseline view remains that the economy is still probably running unsustainably hot and that inflation is down substantially but probably above target. 

"Unlikely that we’ll get enough news Tuesday to move that view very much," he said.

Last week, Federal Reserve Governor Christopher Waller said there are signs that food, energy, and shelter prices will moderate this year but added that he is not witnessing a quick decline in the economic data and is prepared for a longer fight, according to a Reuters report.

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Posted In: Analyst ColorMacro Economic EventsNewsEconomicsFederal ReserveCPI InflationInflationPaul Krugman
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