CPI report came out today cooler than expected. As of premarket this is being received well by the market. One aspect that is being brought up is that inflation peaked in 2022 long before the Fed started its aggressive hiking campaign.This continues to remind me that the Fed doesn’t lead the market but tends to follow the market. The Fed, however, can push the market too far if it continues to be stubborn with its 'higher for longer' meme. If I could give the Fed one piece of advice (if they would even listen) it would be as follows: Understand the structure of today’s economy. A strong operating economy in today’s environment – tech centered - is disinflationary. In essence, if the Fed gets too stuck in its dogma it will be simultaneously holding back growth AND exacerbating inflation. The worst of all scenarios. As we in Massachusetts sometimes say, “may light dawn on Marblehead”.
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