Inflation is Still Running Hot, As Expected, But Don’t Panic!

Filed under: Market Comentary

Today’s topic is about the CPI (inflation) number that came out this morning: a record-high 9.1%. It’s definitely running high and we are all feeling it, of course. But this is totally to be expected and will continue happening for the next few months.

What to Expect in the Next Few Months

From last year, we are actually running under expectations. When they do the year-over-year averaging, we are running off a really low number and replacing it with a much higher number. It’s the law of averages. So, we will see inflation running high for a while.

At the same time, there are signs of the economy slowing down. Google announced that they are going to slow hiring, which is a big sign since it’s such a huge company.

What the Fed is doing is having the desired effect and it is cooling things off. That means it’s going to bring inflation down.

As we get into the latter part of this year, the average numbers will become more favorable – we can expect to see it slowing down at that point.

Bigger Factors in Play

There are still bigger, global factors in play. So, who knows when we will finally get to the spot where we see inflation back down to the target of 2 – 2.5%. It could be a while before we see these changes. Even before that, as we see it come down we will start to see bonds and other factors reacting in a more positive way to bring rates down.

Don’t Panic

It’s interesting to see how things change. The announcement last month showed that inflation was high and the markets reacted accordingly. This month, the announcement was the same, but the response was more muted – everything equalized out over the day.

My takeaway: don’t panic! We are going to expect rates to stay where they are for a few months. Then hopefully we will see things come back down in the latter part of this year and the situation will improve.

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