Yesterday’s pleasantly surprising CPI data, along with the WPI data released earlier, may have strengthened the case for slower interest rate hikes by the Fed from this month onwards. However, the gap between the current inflation rate and the 2% inflation rate targeted by the Federal Reserve suggests there may be a long way to go before an eventual pivot by the central bank.
Furthermore, with the economy refusing to cool down fast enough, as evidenced by the latest employment data, Fed officials may not be willing to take their foot off the brakes prematurely. Hence, market stability in the foreseeable future may be wishful thinking at best.
