“Inflation remains somewhat elevated”. That’s the sentence that summarizes yesterday’s FOMC committee decision to hold rates unchanged. Since the labor market remains relatively strong, the recent pickup in CPI has taken center stage, not only in the U.S. but also around the world. If you look at the table below, you can see that the latest action from most central banks has been to cut rates, but Brazil and Japan, for instance, have already started the hiking cycle. The basis for those hikes is mostly related to defending their currency, but nonetheless inflation is in the shadows, pushing for action. The Fed, the ECB and the BoE are now biased towards hiking, prompting the risk of ending the current economic cycle and putting more pressure on markets. Corporate earnings are also under pressure, even the untouchable 7. All eyes on the next CPI data in the U.S. and across the pond.
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