{"id":204560,"date":"2024-04-05T10:45:00","date_gmt":"2024-04-05T14:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=204560"},"modified":"2024-04-08T03:48:49","modified_gmt":"2024-04-08T07:48:49","slug":"the-us-and-the-inflation-tug-of-war","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/the-us-and-the-inflation-tug-of-war\/","title":{"rendered":"The US And The Inflation Tug-Of-War"},"content":{"rendered":"\n

The Focus This Week: The big inflation tussle<\/strong><\/h2>\n\n\n\n

After hitting a scorching peak of 9.1% in the summer of 2022, US inflation has given up some ground. But a well-matched tug-of-war isn\u2019t lost or won quickly. It\u2019s an inch gained, an inch lost, until the stronger side prevails. And it\u2019s very much a game of inches now: shorter-term inflation measures suggest that progress has slowed and may have stalled. After chilling around the 3% mark for a good nine months, inflation\u2019s making some sneaky moves upward \u2013 and it\u2019s not just the more volatile things like energy and food prices stirring the pot. Core inflation, which excludes that stuff to give a more real-deal look at underlying price pressures, has also hopped a little.<\/p>\n\n\n\n

Of course, inflation\u2019s a big deal for the Federal Reserve (the Fed): keeping it low is one of its two main goals, along with maintaining maximum employment. Now, achieving both can be a delicate balance: cranking up interest rates can clamp down on inflation, but it can also make matters worse for economic growth, and leave people out of work. So far, the balancing act has been mostly working out: inflation is edging closer to target and the job scene\u2019s been holding remarkably steady. But it won\u2019t want to push its luck too far: you can bet the Fed is looking forward to lowering those interest rates, aiming for a return to more \u201cnormal\u201d levels. So let\u2019s hope inflation doesn\u2019t decide to muscle back up again, as that could throw a wrench in those plans, possibly pushing the Fed to hold off on cuts or (gasp) even unleash another rate hike to keep things in check.<\/p>\n\n\n\n

For now, the Fed\u2019s playing it pretty cool. Policymakers say the latest numbers haven\u2019t changed the game plan \u2013 which is to dial down rates \u201cat some point this year\u201d, but only when they\u2019re confident inflation is on a steady path back to that golden 2%.<\/p>\n\n\n\n

That makes next week\u2019s inflation update a real cliffhanger. If the March data comes in even slightly hotter, the Fed\u2019s going to have a tough time convincing everyone that the 2% target is within reach. And, let\u2019s be real, a surprise twist like that could seriously unsettle markets that have been banking on interest rate cuts for a while now.<\/p>\n\n\n\n

On The Calendar<\/strong><\/h2>\n\n\n\n