Asia open: Drop kicked into touch
|Wall Street's reaction to Tuesday's BLS inflation update was disappointing but echoed price pressure concerns from most lower and middle-income American consumers.
The persistence of price pressures in the world's largest economy shouldn't surprise. With the labour market expanding, consumer spending robust, and consumer sentiment rebounding sharply since November, coupled with soaring existing home prices, it would be unexpected if inflation didn't increase again.
This juxtaposition between a strong economy and disinflation is often viewed with skepticism, as, in theory, it shouldn't occur. However, many were caught off guard and in denial this time.
Investors were dropped-kicked into touch, and a punchy encore next month could be a game-changer, requiring a total reassessment of first-half rate cuts.
On Tuesday, Lael Brainard pointed fingers at corporate practices, attributing some blame for lingering inflation to corporate greed. She highlighted how staples like eggs or milk have seen price reductions, but consumer brands have opted for "shrinkflation" instead of lowering prices.
Janet Yellen expressed a more optimistic view, suggesting that month-to-month fluctuations shouldn't be overanalyzed. Despite the challenges, she remains confident in ongoing progress toward reducing inflation.
Brainard's comments may be brushed aside among corporate American leaders, and Yellen's comments may be ignored, at least today, with many investors suffering from the ultimate gut punch: higher inflation.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.