22 days ago • Posted by Jasper Lawler
Forex traders might still see inflation but won't 'Fight the Fed'
March CPI inflation came in like a lion and went out like a lamb, all in a day. The 0.34% m/m print on core inflation is the highest since 2006, other than July and August 2020, which were the bounce back from anomalously low readings during the height of the COVID-19 shutdowns
The Fed appears to have convinced market participants that it is going to tolerate high inflation at least in 2021, acting on its flat Phillips curve, flat labor-market view. Many Fed speakers have essentially labelled any 2021 inflation surge transitory.
Investors do not necessarily believe that the Fed is correct in its assessment, but most investors see fighting the Fed for eight or twelve months as a losing proposition. Given the Fed stance, bond-market hawks are backing off until there is unambiguous evidence that the Fed is wrong or the Fed shows some sign of reconsidering its stance.
Source: Standard Chartered Bank / Zerohedge.com