The argument that we are now past peak inflation seems pretty well baked in.
Consumer price inflation, both core and headline came in below forecasts for the month of October. This is now the fourth consecutive month of inflation coming down and the argument that we are now past peak inflation seems pretty well baked in. Before we get too excited we need to appreciate that inflation year-on-year still stands at 7.9%, well above the Federal Reserve’s (Fed) target but in the meantime markets are assuming that a dovish switch to 50 bps hikes (from 75 bps) will be on the cards. A big drop in yields at the front end of the Treasury curve (20 bps) and corresponding equity market rallies (S&P futures +3%!) will certainly not cause the Fed to change momentum – another decreasing inflation print (ahead of forecasts) at least will be needed to slow the Fed’s charge.
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