Inflation Fight Rages and US Debt Default Risk Grows
There is a scenario where the Fed actually hikes rates again after a pause of several meetings?
The US Debt Default saga is ragging on a little uncomfortably.
There is a reason for the muted reaction of US markets to the Inflation number yesterday.
Core Inflation, the Federal Reserve’s preferred measure is now consistently well above the headline rate. 5.5% compared to 4.9%, and seems to be stabilising over recent months at these extreme elevated levels.
The Federal Reserve’s biggest fear in its entire rule book is inflation becoming entrenched at such high levels. This is because such an outcome can truly destroy an economy for a decade or more.
That headline inflation re-accelerated from 0.1% to 0.4% on the month, is also hard to look away from. Yes, inflation has moderated, but yet remains at extreme levels.
And here is the clincher as to why the next move by the Federal Reserve, after a period of pause to assess the full flow through of previous hikes, could again be to hike rates still further.
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