Expert Commentary

What was the market evaluation of the US inflation figures?
Thu, 15 Feb 2018 14:21:26 GMT
Source: Dukascopy Bank SA
 
© Peter Boockvar
  "The worry of the markets is not that inflation is becoming a big problem, ... it is that the Fed is now forced to play catch up at the same time they are shrinking their balance sheet. If the Fed wasn't so scared of their own shadow in 2015 and 2016 and hiked rates three times each year, we wouldn't be having the same conversation." 
   -  Peter Boockvar, Chief Investment Officer, Bleakley Advisory Group
© David Berson
"Faster economic growth over most of the past year has tightened labor and product markets and helped to boost prices at a faster pace. We expect real GDP growth this year to be around 3 percent — faster than trend and supportive of higher inflation." 
  -  David Berson, Chief Economist, Nationwide 

Consumer inflation in the United States rose markedly in January, raising fears that prices could reveal dangerously strong increase. Price rose in all over the main categories, including gasoline, clothing, shelter food and medical care. 

Investors paid close attention to the report, as fears of rising inflation supported a decrease in stock market and strengthening in bond yields. Consequently, solid increase in consumer prices would sent interest rates higher and could slice corporate profits. 

After the release, markets upgraded expectations for a higher possibility that the Fed would hike interest rates in December. The Central Bank's current benchmark rate was raised to 1.50%, which is now could be too low if strong inflation rate is persistent.

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