The U.S. market is bracing itself as data is released indicating a significant dip in inflation related to consumer prices. A decline in the price of gas in 15% since September is expected to bring the headline inflation rate back down near 3.3%. However, underlying “core” inflation is predicted to hold steady at 4.1%, more than double the goal set by the Federal Reserve. As the Fed continues to deliberate over inflation, a survey of global asset managers reveals a preference for bonds, anticipating that bond yields will decrease in the next year.
Investors are keeping an eye on inflation, with futures markets seeing the first quarter-point cut in interest rates fully priced by July and 75 basis points of easing in total. Despite positive expectations for inflation, the Federal Reserve is anticipated to continue its efforts to lower inflation to its 2% target. While the long-term weakening of the U.S. economy is anticipated by those determined to hold the Federal Reserve to its target, the potential for a positive inflation surprise still exists. U.S. markets are awaiting further information to shape their direction later in the day. Alongside Wednesday’s summit with President Joe Biden in San Francisco, focus is on China’s President Xi Jinping’s U.S. visit and ongoing trade tensions. Special attention is paid to deals made by companies, such as the acquisition of a 77% stake in a Canadian miner’s coal business for $6.93 billion in cash, signaling economic shifts and progress.
