> Inflation is high and will remain high for at least a year (maybe longer).
Is it? Month over month inflation numbers are only slightly elevated, in the annualized 3% range. This isn't particularly high - the high inflation already happened, it's over.
CPI and PPI numbers both came in good. PPI of particular note, services were up 0% month over month, and commodities 1.3% for a blended 0.56% (in line with expectations). Commodities of course are likely to correct hard and fast once the geopolitical situation resolves.
The market is forward looking, so don't get stuck on a dead narrative!
> The era of low rates is over.
I'm not sure we know this either. If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically. And that's a big if, IMO, since inflation is showing signs of being quite well controlled again, and the Fed's goal isn't to achieve a specific funds rate - just low inflation and high employment. High funds rate hurts the employment goal.
It's fun to speculate but important to remember, you're just speculating. So am I. There's no certainty here, and it's pretty easy to construct a compelling counter-narrative.
All we know for sure right now is the Fed funds rate is 1%.
I mean this sincerely if I could just park my savings in an “exactly matches inflation” account I would be over the moon. So yeah kinda, I believe it. Terrible interest rates have genuinely caused me to have to find somewhere to put my money that isn’t a bank.
Yes. But think institutional investors of various flavors rather than personal, individual accounts.
The 2-3% is the Fed funds rate; actual rates on government and commercial bonds will be somewhat higher. (A friend recently pointed out the current 6% advertised rate on lower-grade commercial bonds.) Couple that with much lower risks (on things that aren't those 6% bonds) and it becomes a good third option for anyone whose previous choice was between -3% inflationary return on cash and stock market risks.
Is it? Month over month inflation numbers are only slightly elevated, in the annualized 3% range. This isn't particularly high - the high inflation already happened, it's over.
CPI and PPI numbers both came in good. PPI of particular note, services were up 0% month over month, and commodities 1.3% for a blended 0.56% (in line with expectations). Commodities of course are likely to correct hard and fast once the geopolitical situation resolves.
The market is forward looking, so don't get stuck on a dead narrative!
> The era of low rates is over.
I'm not sure we know this either. If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically. And that's a big if, IMO, since inflation is showing signs of being quite well controlled again, and the Fed's goal isn't to achieve a specific funds rate - just low inflation and high employment. High funds rate hurts the employment goal.
It's fun to speculate but important to remember, you're just speculating. So am I. There's no certainty here, and it's pretty easy to construct a compelling counter-narrative.
All we know for sure right now is the Fed funds rate is 1%.