The Dividend Cafe When Lower Inflation Hurts
Feb 20, 2026
A take on why slowing inflation in 2026 might feel like stagnation rather than relief. Markets and bond signals are parsed to show modest growth expectations. Services and rent data may drive disinflation while housing affordability stays tight. Business investment is narrowly focused on AI and data centers, and weak hiring, low savings, muted lending, and tariff effects all pose demand risks.
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Inflation vs. Disinflation vs. Deflation
- Disinflation means a slower rate of price increases, not falling prices.
- David L. Bahnsen stresses the difference between inflation, disinflation, and deflation to avoid common confusion.
Bond Market Signals Real Growth
- Bond yields and TIPS breakevens reveal market expectations for nominal GDP and inflation.
- Bahnsen points to a ~4.07% 10-year and ~2.4% five-year breakeven implying modest real growth.
GDP Softness And Data Distortions
- Recent GDP has softened versus prior quarters and distortions exist from government shutdown effects.
- Bahnsen notes lower real GDP growth alongside slightly higher year-over-year core PCE (~3%).