June 26, 2023
On Friday we get May core PCE. This is the Fed's favored inflation gauge.
As you can see in the chart below, the Fed Funds rate is ABOVE the inflation rate (core PCE), and it has been since March.
As we've discussed here in my daily notes, this is historically where the Fed has taken rates to get inflation under control (i.e. above the rate of inflation).
So this dynamic of a positive real interest rate, for the past three months, should be putting downward pressure on inflation.
As for sentiment during the month of May, the debt ceiling drama had it plunging back toward the levels of the Global Financial Crisis, and the 2011 debt ceiling standoff …
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