• Notes from the Desk | US Inflation – A Sigh of Relief

Notes from the Desk | US Inflation – A Sigh of Relief Jan 12 2023

Notes from the Desk:  US Inflation – A Sigh of Relief

US CPI was bang on the consensus forecast:

  • YoY Headline Inflation: 6.5% (previous 7.1%)
  • YoY Core Inflation: 5.7% (previous 6%)

 

Goods prices continue to fall while upward pressure is prevalent in the service sector.

Implications.

  • While the Fed will be happy to see CPI heading in the right direction, a tight labour market and strong services inflation ought to keep them on the path to raising rates.
  • The question now is whether they raise to the 5-5.25% band or stop at 4.75-5% and if they move in 25 bps or 50 bps increments.
  • Equity and credit markets should react positively as the end of the hiking cycle appears to be in sight.
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