The U.S. will publish its last inflation report for the year on Wednesday. There are several important points to consider: (1) core CPI is expected to print 3.3% YOY increase, which is stubbornly sticky and above target. (2) crude oil has been down despite conflicts in the Middle East, which helps the headline CPI, but even with that, it’s expected to print 2.7% YoY increase. That’s getting uncomfortably far from the Fed’s 2% target, and Wage growth is stable but expected to go up and contribute to price increases. The last point (3) is related to the chart below: Inflation is following the 70’s pattern too close, and it’s creating anxiety in many fronts, showing the potential of a second inflation wave that can derail rate cuts, or even reverse course of action if inflation starts to meaningfully pick up again.
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