It looks like we may be finally reaching the end of the rate hiking cycle with the current data coming out of the Federal Reserve! This is really great news for risk assets like stocks and real estate in the future.
The data is really starting to support that we have finally reached a restrictive level that will lead us into a 2% objective without further intervention.
Let's take a look at some CPI data coming out from the STL and Atlanta Fed to gain some clarity on this concept.
At one point, we were sitting at over 8% inflation from a Year-Over-Year perspective. We can see this with the data from August of 2022 still running hot at 6.3%
| Measure of Underlying Inflation | 12 Month Growth Rate | |
| 22-Aug | 23-Aug | |
| Core CPI | 6.3 | 4.4 |
| Core PCE | 5.2 | 3.9 |
| Market-Based Core PCE | 5.1 | 3.6 |
The data we pulled from the STL and Atlanta Fed this week is showing a tremendous decline in inflation as compared to 2022. This decline will continue if no rate cuts are given by the Fed. With this restrictive policy in place, we are forecasting future inflation by next year to be at around these figures:
| Measure of Underlying Inflation | Potential Future Inflation |
| 24-Aug | |
| Core CPI | 2.5018 |
| Core PCE | 2.6 |
| Market-Based Core PCE | 2.1 |
If we are correct, we would not have a recession next year, and we would also not need to raise rates next year, which would be the first year we would have price stability since 2020. This would be great for the consumer and risk assets in general.
We can also see this concept in transitive inflation as seen below:
The data is currently showing that the Fed is accomplishing their future goals, which leads us to believe that there may be one more rate hike at this point, and then the policy in place can take us to 2% inflation naturally.
If you would like to discuss the future of inflation more and how it impacts you, please reach out to us for more information.
