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| | Economy Is the Fed's inflation fight finally over, or will price pressures make a comeback within the next year?
· The economy is out of the woods
· Another wave is in the making
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Need more info? Come back to the survey after reading the top story below. | | Top News  Getty Images The mega rally on Wall Street in 2023 hasn't been the only thing that many economists and analysts have gotten wrong. The staggering drop in inflation has confounded many market watchers, with the Consumer Price Index falling to 3%, from a high of over 9% seen last summer, as well as the central bank's favored inflation gauge - the core personal consumption expenditures price index. Data on Friday showed the figure to have moderated on a M/M and Y/Y basis, inching closer to the Fed's key 2% target that is needed for stable prices in the U.S. economy.
Fool me once? Following an infamous "transitory" call from 2021, Jay Powell and Co. made a serious policy U-turn, ratcheting up rates from near zero to 5.5% in the span of 16 months. A technical recession ensued in the first half of 2022, but the U.S. economy has been resilient since then, with quarterly GDP recently growing at a 2.4% annualized rate, or almost a full percentage point stronger than the 1.5% expected. Inflation numbers have also routinely come in better than anticipated, prompting many investors to consider whether the central bank continues to be overly cautious in its fight against inflation to compensate for criticism that it had been late (really late) to the game.
"Inflation has moderated somewhat since the middle of last year, nonetheless the process of getting inflation back down to 2% has a long way to go," Powell said at his press conference last week. "We'd really want to be sure that inflation is coming down in a sustainable [way]. It's hard to make - I'm not going to try to make - a numerical assessment of when and where that would be. So we intend, again, to keep policy restrictive until we're confident that inflation is coming down sustainably."
What to watch: As mentioned previously, Powell did shift his tone especially with regards to the outlook for the U.S. economy, with Fed staff no longer predicting a recession. However, the debate still rages on over whether disinflation will be able to find a permanent footing, as well as the impact of additional rate hikes. "Some Fed officials are not yet convinced they've done enough - and don't want inflation to resurge on their watch," noted the American Institute For Economic Research. "If disinflation continues over the next few months, such a hike could prove devastating - not merely wiping out inflation, but economic growth and employment as well." Take the WSB survey.
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In Europe, at midday, London flat. Paris +0.7%. Frankfurt +0.2%.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.8% to $81.24. Gold -0.2% to $1,996.60. Bitcoin +0.3% to $29,387.
Ten-year Treasury Yield flat at 3.97%. Today's Economic Calendar | | What else is happening... Yellow ( YELL) shuts down operations, plans to file for bankruptcy. Walmart ( WMT) pays $1.4B to raise stake in Indian e-commerce giant. China manufacturing activity shrinks for fourth straight month in July. Credit card delinquencies tick up, net charge-offs fall in June. Disaster-prone areas turn haven for those seeking cheaper homes. J&J's ( JNJ) bankruptcy plan to handle talc lawsuits is rejected again. Biogen ( BIIB) to buy Reata ( RETA) at enterprise value of $7.3B. RSV treatment market to surge past $9B by 2029 from $1B today. Assessing the impact of proposed Basel III endgame rules on banks. What does Oddity Tech ( ODD) signal about AI's future on Wall Street? | | Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day. | | | | |
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