14 February 2023
If you are covering the latest US inflation data, please find below a comment from Marcus Brookes, chief investment officer at Quilter Investors:
“While inflation in the US continues its gradual march back down from its recent highs, it cannot be claimed to be job done just yet for the Federal Reserve as the print comes in above expectations. It is going in the right direction, but the path the Fed takes from here remains uncertain. While the year-on-year figure is disappointing, the monthly figure is trending in the right direction and the Fed should feel comfortable enough to stop raising rates soon, but as ever inflation is going to dictate things. However, this data shows that markets would be wise not to get ahead of themselves. Core inflation continues to be stickier than many would like, while the jobs market is showing significant resilience. Just recently we saw a surge in employment, highlighting the fact the US economy is holding up in the face of rising rates and inflationary pressures.
“As a result, while rate hikes may be off the cards soon, rate cuts should not be taken as a given later in the year. The Fed will be determined not to take its foot off the gas too early and miss the soft landing it is hoping for. With inflation falling, but at a much more gradual pace than on the way up, the opportunity for policy misstep is greater. Today’s inflation number reminds every one of the difficulties faced, and we are still far too early to declare victory yet. For investors, patience and diversification is required as it is unlikely to be a smooth journey.”
