There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case. It will take some time.
– Fed Chair Jerome Powell, February 7, 2023
After a strong start to the year for financial markets, which was partly based on the view that the Fed was being overly cautious and a pivot/pause was imminent, the stronger-for-longer employment data, solid retail sales, and the recent CPI and PPI data have led investors to question just how smooth of a landing there will actually be in the absence of further rate hikes. As such, over the last couple of weeks, market rate expectations have been ratcheted up to be more in line with the Fed’s guidance, and rate cut expectations have been scaled back. In this Economics Weekly, and following the latest CPI inflation data for January, we discuss why the very near-term inflation picture is likely to remain “bumpy.”
For a copy of this report or to subscribe to the Economics Weekly or Economic Indicators reports, please contact your William Blair representative.
Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.