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Inflation report

After the inflation report yesterday, where CPI increased by 7.1% (vs 7.3% expected), today is the #FOMC turn with the decision on interest rates. As you can see below, the most likely scenario according to fed fund futures is a rate hike of 50 bps. If that were to materialize, fed funds will be at 4.25-4.5%. Still below core CPI and therefore negative in real terms. Furthermore, the yield curve is inverted, meaning that all US treasury bonds offer negative real yields. With that in mind, Powell press conference today, should offer the market an indication of whether the fed is going to pause and evaluate the damage to the real economy or if they will continue hiking, until inflation reaches the 2% target.

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