The real elephant.

"US consumer sentiment sagged to a six-month low in May as households worried about the higher cost of living and unemployment," and "The mood was downbeat among Democrats, independents and Republicans." "The survey's reading of one-year inflation expectations rose to 3.5% in May from 3.2% in April," and "Its five-year inflation outlook increased to 3.1% from 3.0% in the prior month." Inflation expectations have been in the 2.9%-3.1% range in 30 of the last 34 months but higher than the pre-pandemic range of 2.2-2.6%. Reuters. "Debates over whether US interest rates are high enough deepened among Federal Reserve officials this week, and may be stoked further after a key survey showed a jump in consumers' inflation expectations." Reuters. "The US Inflation Rate is at 3.48% (in March), compared to 3.15% last month and 4.98% last year." ycharts. Consumer Price Index (CPI) inflation rate in India decreased to 4.85% in March from 5.09% in February. pib.gov.in. "Households' inflation expectations for both three months and one year ahead moderated by 20 basis points (bps) each to 9.0% and 9.8% respectively, their perception on current inflation, however, remained unchanged at 8.1%." RBI. Perhaps, households know more than the RBI because the CPI is calculated on the prices of a basket of goods and services based on the Consumer Expenditure Survey of 2011-12 and is completely outdated. FE. The US Fed is very serious about inflation but, "The elephant in the room was CPI inflation. The elephant has now gone out for a walk and appears to be returning to the forest," joked RBI Governor Shaktikanta Das. After the pandemic struck, presidents Trump and Biden unleashed around $10 trillion in new spending, $8 trillion of that after the brief, lockdown-induced recession of early 2020 was over," wrote Ruchir Sharma. In India, the government announced a five-part package claiming to amount to Rs 20.97 trillion, or 10% of GDP, but "Over a dozen banks, brokerages and rating agencies have said the package falls short of 10% of GDP and works out around 1%." TOI. Another elephant in the jungle, perhaps. "One result is that India's public debt is up by about 8 points as a share of GDP - half the increase in US." "US cannot sustain such aggressive stimulus indefinitely," and "it is hard to know when the sugar rush from the past stimulus will wear off. But once it does, the landing may come faster than any conventional model suggests." Sharma. "The US economy looks to have steered clear of danger after the specter of stagflation spooked markets and put analysts on edge in recent weeks. BI. In India, rural consumption grew by "only 0.5% year-on-year in the second quarter of FY24." "This is not just a blip of higher food inflation in February 2024 that resulted in 3.3% decline in real wages but has been observed for 25 out of 27 months to February, according to the Centre for Monitoring Indian Economy." FE. Stagnation with inflation, that is stagflation. The RBI and the government may deny it but households know better. That's the real elephant.