(TLDR : Fed hike/QT will continue its aggressive course regardless of Friday CPI)
8th day of sideway movement. Market is waiting for CPI numbers on Friday before making its move. Breaking upwards or breaking downwards, we do not know. But what I do know is that even if CPI number is slightly lower, meaning there is a "chance" that inflation had past its peak, Fed will still carry on with June/July of 0.5% hike each.
Firstly, Fed look at few months of data before it can be convinced that inflation reached and come down from its peak. So just May CPI alone is not enough to make Fed changed its course. We also need June/Jul/Aug CPI data to convince Fed of any change of its current policy.
Next, Fed current hike and QT is actually too small to effectively bring down inflation fast. Paul Volcker push interest rate from 11% to 20% during 1981 and brought down the inflation. Not saying current Fed need to push up so high but just saying inflation will not come down fast. So Fed tightening policy will be ongoing for longer than we may think. Food for thoughts for people who are looking at long term of the market.
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