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All Eyes on the US Inflation Data

The FOMC meeting minutes showed that the door remains open for higher rates. The Fed officials have been surprised at the pace of inflation and indicated at their last meeting that they expect higher interest rates to remain in place until prices come down.

“Participants judged that the Committee needed to move to, and then maintain, a more restrictive policy stance in order to meet the Committee’s legislative mandate to promote maximum employment and price stability,” the meeting summary stated.

Officials further noted that with inflation “showing little sign so far of abating … they had raised their assessment of the path of the federal funds rate that would likely be needed to achieve the Committee’s goals.”

“Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook,” the minutes said.

In short, the Federal Reserve is not prepared to change the tone yet, but also hinting at a possible slowing down at some point. The question remains when? In my opinion, they won’t stop until something breaks.

All Eyes on Inflation Data Tomorrow

Wondering why the FOMC meeting minutes had almost no impact on the markets? It’s not rocket science. Everyone is waiting for the inflation data which will be released tomorrow.

Estimates point to mixed outcomes. YoY Core CPI is expected to rise again to 6.5% up from 6.3%, while the YoY CPI is expected to ease a bit towards 8.1% down from 8.3%.

Now here’s the thing, as long as core inflation keeps pushing higher, markets will remain under pressure. The only thing that may help the market tomorrow is if core inflation comes with a surprise lower. If so, markets will be green tomorrow.

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