Nice to get inflation number that is better than expectedThere is more uncertainty noiseStill on path to get to 2% inflation.Today stations recent ferment was a bump.Next 12 to 18 months, rates can go down a paramount.Employment is stable, want to keep it stable, to do so rates need to come down to something like neutral.Agree policy rate is still far from neutral rateThe Fed is significantly less restrictive than we wereThe neutral rate is around 3%.Our goal is to get inflation down to 2% and incomes would rise faster than the pricesAnything that will impact jobs and prices we try to processWhen the new administration is in, we will process what policy does for inflation and employment Uncertainty on policy as part of why I feel rate path next year is a bit more shallow.Rates will come down by a judicious amount next yearRate path will be determined by employment and pricesWe might be more dependent on data and the conditions and the economic outlook If look at the dot plot, what is the long run neutral rate is below the level today.The last 6-months of PCE inflation is very close to 2%Recent inflation has been higher than expected, for sure bumps can happen and policy uncertainty, but its clear inflation is heading toward 2%.
US stocks are now higher on the day with:
Dow up 0.84%S&P up 0.70%NASDAQ index up 0.60%
The small-cap Russell 2000 is now up 1.06%.
Looking at the US debt market
2 year 4.293%, -2.6 basis points5 year 4.362%, -6 1 basis points10 year 4.516%, -5.4 basis points30 year 4.710%, -3.2 basis points
This article was written by Greg Michalowski at www.forexlive.com.
