Market Rundown | Peak Fed Rate May Be 3% Now- MS
Markets driven by 2 major forces today: Expectations of easing inflation, and “progress” in Ukraine talks.
Market Rundown
Good Morning: The dollar is down 25. Bonds are flat. Stocks are slightly higher. Gold, Silver, Oil, and other geopolitical risk commodities are all much lower. Only Wheat is holding up. Oil is down over $8.00 as we write this. PPI is today
Markets driven lower by 2 major forces today: Expectations of easing inflation, and “progress” in Ukraine talks. Most assets for the moment are discounting an FOMC that will not disappoint hawks. Yet stocks are bucking this trend so far and are slightly higher. Remember, that is after a week of sell-offs for equities ,so its partly noise
Cheers
Post Excerpt
Bringing inflation down will now take a more meaningful tightening in financial conditions than the Fed anticipated in its December projections.
More at bottom
Podcast
Guidance
The leaders of three East European EU member states are making an unexpected trip to the Ukrainian capital this morning for talks with President Volodymyr Zelensky. Negotiations between Russia and Ukraine are set to continue. China, meanwhile, wants to avoid being sanctioned by the U.S. as fears over possible penalties are adding to a historic market selloff. The first high-level talks between U.S. and China since Russia’s invasion of Ukraine were described as “substantial,” but no specific outcomes were announced. In the U.S. a number of states are working on measures to temporarily roll back their gasoline taxes as pump prices soared past $4 a gallon. - Bloomberg
Zen Moment
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We have argued that to bring inflation down to a sustainable level consistent with the Fed's 2% goal, the peak rate in this cycle may well be in the range of 2.5% to 3.0%, something financial markets have not fully appreciated.