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Printed: 13 July 2024 12:40 AM

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14 Jun 2024 - Hedge Clippings | 14 June 2024

By: FundMonitors.com

    

Hedge Clippings | 14 June 2024

US Inflation - Progress, but could do better

Jerome Powell's comments on US inflation following the Fed's FOMC meeting this week sounded somewhat similar to Hedge Clippings' school reports all those years ago: "Making progress, but could do better..." seems to be a consistent theme in both. Luckily for the US economy and US consumers, the other regular comment - "must try harder" - can't be applied to Jerome's report card, or we'd be seeing the Fed's Dot Plot, (the members' expectations for the timing of the next interest rate move), trending upwards. As it is, the trend is still down, but the timing of any move is continually being extended.  

At the end of last year, the expectation was that the Fed would cut up to six times in 2024. By Easter, that had reduced to three, and here we are in June, half way through the year, and rates remain at a 23-year high for the seventh consecutive meeting, and with the dot plot indicating just one or possibly two cuts this year.

The same applies to Australia, except the expectation is possibly for one downward move, or none. Of course, if the CPI number is bad, then as they've said in the past they won't hesitate to raise them. As the next CPI figure is not due until the last week in June, it is unlikely that the RBA will step out of line next Tuesday when they announce the result of their two days of deliberations, particularly this week's labour market numbers, described by the ABS as "relatively tight".

As such the theme of Hedge Clippings' weekly commentary is likely to remain firmly fixed on inflation and interest rates, as it has been for the past couple of years. These themes have changed with the economic times, as COVID, deflation, the Hayne Royal Commission, QE, and prior to that the GFC, have each taken centre stage, with the occasional distraction provided by various politicians both home and abroad.

This theme will change too in due course, to be replaced by who-knows-what? We have previously mentioned geo-political risk, but in spite of Ukraine, the South China Sea, and Palestine, these haven't derailed global economies - yet.

One theme to watch which is lurking and brewing is the possibility of an impending global trade war, as the US and Europe become more protectionist, and China seeks an outlet for increasing industrial output, and to deflect the potential social unrest at home.

Throw in a move to the right in Europe, an increasingly protectionist Biden, and/or change in the White House in November, and the theme may change.


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