Principal Knowledge Center

Does this improved inflation print materially change the Fed’s thinking on monetary policy? The markets still think the odds of a Fed hike in 2017 are low, even though the odds of a December rate hike went up to 50% from 40%, perhaps in anticipation of strengthening inflation readings in the months ahead.

We expect the synchronized world economic expansion to persist. Interest rates are low and financial conditions are easy.

The upturn must be consensus because it hit the front page of the Wall Street Journal. Now that it’s official, the economic momentum of the upturn has likely crested, and we’d agree.

Officials at both the U.S. and Eurozone central banks are concerned that recent inflation reports have been weak. But, both banks appear resolute in their desires to reduce monetary accommodation.

Will inflation ever reach the Fed’s target of 2%? Yes, given a little time. If commodity prices stay in current ranges, they will put upward pressure on inflation.

A synchronized upturn suggests central banks may synchronize removal of monetary accommodation. It’s slowly heading that direction.