I must admit, I had been expecting the Fed to be a little more hawkish over the past couple of months. Given how tone deaf they seemed during previous tightening periods when the US dollar was screaming higher and oil plunging to levels that would have resulted in entire states going bankrupt, today’s climate of rocketing risk assets and rising inflation seemed like a no brainer to err on the hawkish side. And I am not alone in this analysis. Recently Peter Broockvar, the Chief Market Analyst for the Lindsey Group published a great list titled “Why March Must be on the Table.” Broockvar went through a variety of economic metrics to demonstrate how economic conditions have heated up over the past couple of months. (the note was from last week, so some of the data is a touch stale)
5 yr inflation breakeven: 12/14 was 1.83% vs 1.97% today
10 yr inflation breakeven: 12/14 was 1.97% vs 2.02% today
Headline CPI: November CPI (the one they saw at December meeting) 1.7% vs 2.4% expected tomorrow for January
Core CPI: November CPI 2.1% vs 2.1% expected tomorrow January
Headline PCE: November 1.4% vs 1.6% for December
Core PCE: November 1.7% vs 1.7% for December
NY Fed survey of inflation expectations: November 2.5% vs 3% in January
UoM one yr inflation expectations: November 2.4% vs 2.8% in February
CRB index: 12/14 192 vs 192 today
Journal of Commerce index: 12/14 104.5 vs 108.7 today
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