This Week's State Of The Economy - What Is Ahead? - 12 May 2023

By: Taro Chellaram /Wells Fargo Economics & Financial Report/May 17, 2023

This Week's State Of The Economy - What Is Ahead? - 12 May 2023

Inflation remains uncomfortably high in the United States. In April, the CPI rose 0.4% on both a headline and core basis, keeping the core running at a 5.1% three-month annualized rate. However, details pointed to price growth easing ahead, while the Producer Price Index and NFIB small business survey also suggested more meaningful disinflation is on its way.  Maybe that’s why the bond market is currently priced for 75 bps of Fed easing by the end of the year. One interpretation of that pricing is a 25% probability of 300 bps worth of easing coupled with a 75% probability of no easing.  Count me in the 75% and still perplexed why some think this simple return to historically “normal” interest rate levels should somehow lead to any easing back to abnormally lower rates later this year.  That said, I’m wrong about so many things, so frequently, that a view contrary to mine may be the safe play.




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