The Week Ahead: As inflation simmers and interest rates rise, investors stew
The final datapoint to lock in the market's expectation for the
February's consumer inflation number will cement predictions regarding how much the Fed will raise its target short-term interest rate when it meets on
As consumer inflation stays high, so will borrowing costs.
Inflation has been slowing, though remains stubbornly strong. Supply chains may be smoothed out, but pandemic government spending, global tensions and record low unemployment continue supporting higher-than-comfortable price trends. The deceleration of inflation late last year was a welcome sign. But prices sped up again in January. And the February data is expected to show more winter heat for prices.
The
At the beginning of this month, the market was expecting just a 0.25% interest rate hike later in March. One week later, the forecast by the CME FedWatch Tool flipped with the odds favoring a stronger half percent hike when the Fed's Open Market Committee meets.
That's the power of the bank's open mouth policy. Chairman
Recession talk quieted down earlier this year thanks to a strong fourth quarter gross domestic product report and a huge surprise jump in January of seasonally adjusted new jobs. Interestingly, according to
Another strong month of inflation does not guarantee a recession, but it will continue to test the Fed's resolve and investor's patience.
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