A market-based measure of inflation recently emphasized by the Federal Reserve to show that price pressures will soften is set to start rising again. That, along with several other signs of accelerating price growth, opens up opportunities to fade declines in short-term rates that have been guided lower by a dovish central bank.
The inflation gods smiled on the Fed on Wednesday, with December’s core CPI coming in under expectations, driving a rally in stocks and bonds. However, the bigger picture remains that inflation is still well above target, and making treacle-like progress in getting there.
