Market participants pause as they wait for tomorrow's inflation report

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Market participants pause as they wait for tomorrow's inflation report

It is a given that the potential for inflation to decline in the December report. The assumption that inflation continues to diminish and has for the most part been factored into market pricing. Tomorrow's Consumer Price Index will occur after the strong and hawkish speech by Chairman Powell delivered yesterday at a central bank conference in Sweden.

One topic that has been absent until yesterday was that the pressure from politicians will not influence Fed policy. During his speech Chairman Powell said,"The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors".

This means that regardless of how much headway has occurred between November and December and how deeply inflation has been diminished it seems highly unlikely that it will influence the Federal Reserve to let up on its aggressive monetary policy and rate hikes. The Fed is so overwhelmingly focused on not letting inflation become more entrenched in the economy that it seems that they are not seeing the forest from the trees.

 

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