Macro Conditions Are Still Too Strong for the FOMC to Stop Its Rate Hikes
The headline 12-month inflation rate increased in August from 3.2% to 3.7%, according to this morning’s Consumer Price Index, but the more important core inflation (which excludes food and energy prices) showed a widely anticipated decline from 4.7% to 4.3%.
Investors are generally taking this as a reassuring sign that the Fed is finished raising interest rates to fight inflation. In fact, the market-implied probability that the Federal Open Market Committee (FOMC) will raise rates again at next week’s meeting sank from 8% yesterday to just 3% today, according to the CME FedWatch Tool. That’s whistling past the graveyard.
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