I’ve been writing for months now that markets seem to indicate that we were near the Fed’s tolerance for longer-run inflation expectations, and the mild negative reaction to the Fed’s comments this week seem to support that view.
The S&P 500 closed below it’s May 7th high yesterday, after comments from FOMC Chairman Powell indicated the Fed could start hiking interest rates earlier than previously indicated. Also, 5 year inflation expectations, for example, have fallen consistently from highs reached in May.
This helps put the some of the inflation hysteria into context, doesn’t it?
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