The recent banking crisis has immediately lowered expectations for future inflation expectations and interest rate hikes. Why? There is a direct correlation between economic activity and loan volume, and loan volume is destined for a short term contraction, at a minimum, as the regional banks, and even the big money center banks, reassess their positions and await whatever revised government regulation comes out of this banking crisis. So the economy will slow, even more than recently predicted, and that should produce lower inflation. Perversely, this banking crisis may have been just what the Fed needed to help it reduce inflation.
Housing remains the main event as to this year’s inflation flight path.
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