Some investors are worried though that a growing disconnect between market expectations and stubborn price pressures could create problems down the road.Some investors are worried though that a growing disconnect between market expectations and stubborn price pressures could create problems down the road.
Supercore inflation rose by just 0.1% last month, the slowest rate since July 2022, according to the data. The data point has become of increasing interest to financial markets since Federal Reserve Chairman Jerome Powell highlighted persistently high service sector inflation during a press conference earlier this year.
“There is a pretty big disconnect,” said Liz Young, SoFi’s head of investment strategy, during a call with MarketWatch. “One of them is going to be wrong. Either the Fed is going to be wrong or the market is going to be wrong.” For inflation to reach the Fed’s 2% inflation target before the year-end, things would need to change pretty quickly, Matt Weller, global head of research at Forex.com and City Index, told MarketWatch that he thinks this is unlikely.
But looking past the Fed’s June policy meeting, there is another potentially more troubling way that stubborn inflation could spell trouble for the Fed and for markets.