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Last week’s Macro Super Bowl, as we said to it in our most recent Ahead guidance roundupCertainly used to live up to the hopes of fireworks.
Just look at how much the market obstacles have been shaken to cut the September rate:
This initial dip was caused by some beautiful dirty PCE data that questioned the path of monetary policy. As seen in the chart below, inflation is going above the 2% target of Fed:
More importantly, the goods are now increasing inflation, unlike the last two years, where most of the viscous inflation is related to services.
The core goods spent most of the previous year in a recession, even a time defense. Now this is the fact that recently the increase in tariff-powered price appears to be associated with increase.
So this was Baseline title in the FOMC meeting.
But then… we got the job report. And it was a print disaster. So much so that Trump left and fired the Commissioner of Labor Statistics!
Primary catalysts were heavy amendments in the quantity of jobs created in the last few months due to the obstacles of rate cuts for September:
Suddenly, everyone realized that the labor market is on stall-motion and is in danger of deteriorating meaningfully.
So where does it leave us now how Fed is thinking about his double mandate? Fraud, at least to say.
On one hand, the labor market is shouting to resume the rate-cutting cycle. On the other hand, inflation increases high speed without tapping the 2% inflation target of the Fed at any time.
Keeping this bifurcation in mind, it is no surprise that we have seen the first two governors disintegrated in the fed in 30 years:
Looking forward, everyone’s eyes will be on the Jackson Hole seminar in August. Powell is likely to provide further guidance (intention of punishment) on Fed’s plans for cuts in September rate. If it seems similar to the situation that we did in the last summer (where this exact position was done to guide the September cut about the weakness of the labor market), this is because it is.
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