![]() "Policy tightening is likely to be gradual and at a pace that risk assets should be able to handle, and is occurring in an environment of strong cyclical recovery."Īlso sticking to the gradual stance was Ian Lyngen of BMO Capital Markets. Morgan's Marko Kolanovic wrote in a note to clients. Others discounted the outlook, citing Powell's infamous "transitory" call from 2021, and said traders were rushing in to buy the dip despite the Fed taking away the punch bowl.Īnalyst commentary: "The pullback in risk assets in reaction to the Fed minutes is arguably overdone," J.P. Many of the expensive tech names recharged, with the Nasdaq closing the day up 1.4%, as investors heard comments that inflation would probably ease by the middle of this year. CPI, it helps to know what used car prices are doing." Other notable categories of the report to watch include rent and shelter costs, transportation, and medical care.Īn interesting dynamic played out in the market yesterday as Powell delivered his testimony to the Senate Banking Committee. economy, but if you want to understand U.S. "Today, economists test their ability to forecast the price of a used 2000 Honda Civic," noted UBS chief economist Paul Donovan. Take a look: Investors will be analyzing the CPI industry breakdown, parsing the report for evidence that inflation is picking up in broader swathes of the economy like the services sector, and not just areas affected by supply chain issues. ![]() "In a way, high inflation is a severe threat to the achievement of maximum employment and to achieving a long expansion that can give us that." To get a long expansion, we're going to need price stability," Powell explained. ![]() The price pressures could also impact the other side of the Fed's dual mandate, or "maximum sustainable employment." "To get the kind of very strong labor market that we want with participation, it's going to take a long expansion. "The economy no longer needs or wants the very accommodative policies we have had in place." He also expressed hope that the alleviation of supply chain bottlenecks would bring inflation down, as the economy returns to "normal supply conditions," but admitted that it has taken much longer than expected to get the problems under control. "If we have to raise interest rates more over time, we will," Powell told the Senate Banking Committee. It would also represent the biggest annual increase since February 1982, while core CPI, which excludes food and energy and is the Fed's preferred gauge of inflation, is even forecast to rise 5.4% Y/Y.Įyes on Powell: In his confirmation hearing on Capitol Hill on Tuesday, the Fed Chair emphasized that he will use all the tools of the central bank to get inflation back on track. ![]() That would be the eighth straight month of a figure higher than 5%, and the third consecutive month above 6%. Another bad inflation report is on tap this morning, with consumer prices expected to have jumped 7% in December from a year ago. ![]()
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