Sorry for the delay in writing but the financial information flow is currently such a mind salad (my phrase) that it takes me some time to weed out the unimportant.
So, let me do that for you here a bit.
With all the focus on each inflation data point (CPI, PCE, etc.) it really can come down to what the market might be saying.
For me the 10-year treasury yield has often been a pretty good tell on inflation AND projected growth over the longer term.
What I see here is, after reaching a short-term peak in October of 23, the 10-year yield has started to stall. And to me this means that either or both longer-term inflation expectations and growth expectations are coming down.
The problem is there is no specific way of telling how much of this is lower inflation vs lower growth. My actual hope is that the yield hovers here for a bit thereby giving the Fed a chance to lower the front end of the yield curve without effecting growth too dramatically.
But there is a possibility of a tipping point arising in which growth stalls and Fed rate decreases aren’t able to kick start that growth again.
This is what the chart is telling me: Inflation is pretty much handled, and the focus should begin on normalizing the yield curve to prevent a risk to the current economic growth rate.
I still believe the Fed is smart enough to recognize this and will begin to cut rates within the next 4 to 6 months. I also expect the data to support this reaction.
We shall see. |
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