Truflation’s Inflation Spike Rockets To 7-Month Peak, Casting Doubt On Fed Rate-Cut Cheerleaders, Says Jim Bianco

The President and founder of Bianco Research LLC., Jim Bianco, is sounding the alarm on inflation, pointing to a recent surge in a real-time inflation metric as a challenge to hopes for Federal Reserve rate cuts.

In a series of posts on X, he argued that recent data, combined with larger structural changes in the economy, suggest the U.S. may be settling into a new normal where a 4% neutral interest rate is the standard.

Truflation Inflation Index Flashes A Red Flag

Bianco’s immediate concern was sparked by the Truflation U.S. Inflation Index, an independent gauge that provides daily updates. On Aug. 31st, the index hit 2.31%, a seven-month high that he said was “flashing a yellow to red flag on inflation.”

While the index was revised down to 2.00% the following day—a regular occurrence at the start of a month—the initial spike highlighted the renewed upward pressure on prices. Bianco questioned whether the Fed could proceed with rate cuts if such trends continue.

A New Normal With 4% Neutral Funds Rate?

Beyond the daily data, Bianco argued that the post-COVID economy represents a fundamental regime shift. He presented charts showing that inflation, real yields, and the real funds rate are now operating at a significantly higher and more volatile level than in the recovery periods following the 9/11 attacks and the 2008 financial crisis.

This structural change, he contends, marks “the end of the era of low inflation and zero to negative real interest rates.” Based on this new landscape, Bianco suggested a major recalibration is needed, stating, “This would imply a neutral funds rate of at least 4% if the Fed could hit its 2% target.”

Second Inflation Mountain To Follow?

Adding to the cautionary tone, other analysts are also warning of resurgent inflation. Apollo Chief Economist Torsten Slok, in a chart shared by Mike Zaccardi, drew a parallel between the current inflation pattern and that of the 1970s.

Slok noted that after the first major inflation wave in the early ’70s, a second, larger “inflation mountain” followed. The analysis raises concerns that the recent cooldown in price pressures might not be the end of the story, but merely a temporary lull before another significant surge.

Price Action

Meanwhile, experts still expect at least two rate cuts in 2025, bringing the interest rates below 4%. But while markets celebrate the prospect of cheaper money, Creative Planning’s chief investment officer urged extreme caution, stating that when it comes to long-term predictions, Fed officials “don’t know any better than my seven-year-old.”

The CME Group’s FedWatch tool‘s projections show markets pricing a 91.8% likelihood of the Federal Reserve cutting the current interest rates for the Sept. 17 decision.

The tool also projects a 95.8% and 99.2% chance of easing in October and December meetings, respectively.

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Originally Posted September 2, 2025 – Truflation’s Inflation Spike Rockets To 7-Month Peak, Casting Doubt On Fed Rate-Cut Cheerleaders, Says Jim Bianco