A Long Road Ahead

The most important development in markets last week was regarding Consumer Price Index (CPI) inflation. Headline CPI came in at 8.5%, lower than the 9.1% from the previous month. Overall, it appears that inflation has finally peaked and is starting to come down, which has created optimism in markets. There’s reason to be positive: we’re tracking several trends indicating that inflation is likely to continue to decline in upcoming quarters. However, inflation still remains much higher than the Federal Reserve’s 2% target and we have a very long and bumpy road ahead of us to get there. This week, we will receive the FOMC minutes from the last Fed meeting from which we will be looking for any signals about plans for future interest rate hikes. We are not expecting to see a dovish pivot—it’s too early to declare victory when inflation continues to be so far from 2%. We believe the Fed will keep rates high until inflation falls much closer to their target.

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