How much does it matter if the Federal Reserve starts cutting rates in June instead of May?
Has inflation been vanquished, or is it bouncing back?
Over the past three months core consumer prices, which exclude food and energy, have risen at an annual rate of 4%, up from 2.6% in the three months to August.
Producer prices have risen more than expected and consumers’ expectations of inflation over the next year have gone up, too.
Inflation is much lower than at its peak, but it has not yet been defeated.
As a result, Treasury yields are roughly back to where they were before the Fed’s doveish turn. Yields on long-dated bonds are higher still.
The Economist 22 Ferbruary 2024
https://www.economist.com/leaders/2024/02/22/do-not-expect-americas-interest-rates-to-fall-just-yet
Rate Cuts Might Be Delayed. That’s No Reason to Panic.
The Dow was down as much as 750 points by midafternoon and it closed 525 points, or 1.4%, lower.
The more rate-sensitive Russell 2000 index of small-capitalization stocks plunged 4%, and the yield on 10-year U.S. Treasury notes rose to its highest since November.
It’s happening
The stubbornness of sticky prices fueled partly by rising wages is what the Fed feared from the outset.
US inflation data were a bona fide nasty surprise, suggesting a risk of overheating.
There may be some quirks in the data, but not enough to overturn broad conclusions.
That’s because measures excluding outliers, and focusing on the stickiest prices, are turning upward.
Service sector wages and housing costs will continue to be the biggest issues.
Most of the bond market’s shift since the “Powell Pivot” has now been reversed.
10 Y
John Authers Bloomberg 14 February 2024
UIS Inflation at 3.1% - Armageddonists
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