Federal Reserve Bank of St. Louis President James Bullard at the Jackson Hole Economic Symposium in Moran, Wyoming, US, Thursday, Aug. 22, 2019.
David Paul Morris | Bloomberg | Getty Images
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US stocks fear a relentlessly overheating economy — and flamboyant rhetoric from the Fed.
what you need to know today
- The US producer price index, which measures inflation at the wholesale level, rose 0.7% in January, It was the biggest increase since June, and 0.3 percentage points higher than economists had expected.
- Tesla is 362,758 vehicles recalled Equipped with its experimental driver-assistant software. The company warned that the software, known as Full Self Driving Beta, could cause the vehicles to crash.
- Supporter is crypto coming back in 2023, according to Bernstein analyst Gautam Chugani. Investors may be taking the recent regulatory actions in the US less seriously than expected.
Bottom-line
The US economy is firing on all cylinders if we look at the figures for January. A quick recap: Lowest unemployment rate in 53 years. Improvement in consumer spending despite higher prices. And overnight, we learned that the producer price index rose by the most in eight months. This almost bizarrely strong economy implies that inflation – while still falling – remains uncomfortably high and sticky.
For a while, it looked like the market could live with it – and even embrace it as a new normal, in which economic growth with inflation above 2% could exist comfortably. Could With the hot inflation report exceeding everyone’s expectations, markets soared.
till tomorrow. The markets eventually fell. The Dow Jones Industrial Average fell 1.26%, the S&P 500 fell 1.38% and the Nasdaq Composite fell 1.78%. “It shouldn’t be surprising to see markets taking a breather as dovish Fed expectations fade in the coming months,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley.
Actually, it’s not like the Federal Reserve’s pigeons are flying. is that the hawkers are swooning. Markets had widely anticipated, and priced in, a 25 basis-point interest rate hike for the Fed’s next two meetings. Yesterday, that forecast was badly shaken.
James Bullard, president of the St. Louis Fed, said Thursday that he was “in favor of a 50 basis point hike and … argued that we should reach a level of rates that the committee sees as sufficiently restrictive.” May it be quick.” Cleveland Fed President Loretta Mester echoed Bullard’s sentiment, saying she wanted higher rate hikes. Neither Meester nor Bullard vote on the Federal Open Market Committee this year, but their sentiments could prompt the Fed to throttle inflation faster.
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