Asia wrap: No need to over-tighten

As we look ahead from here, the Fed's decision to move further on rates (either up or down) will likely be swayed by the data -- inflation and growth, as per the central bank's mandate. Interestingly, growth data has been improving (suggesting more hikes may be necessary) while inflation has been decelerating (suggesting fewer hikes are necessary). But most FOMC members predict the need for higher rates from here (as per the dots), suggesting that the balance of growth and inflation may not yet be optimal.

The labour market- one of the most resilient areas of the post-pandemic economy- has begun to show signs of normalization as the quits rate, company reports of labour shortages, and wage growth have all fallen substantially.

May PPI was lower than expected yesterday, reflecting a decline in energy and food prices. May CPI was slightly higher than expected, but much of it was driven by higher used car prices -- a category that high-frequency micro data suggests may soon recede. 

The resolution of the US debt crisis, muted effects of the March banking crisis, plus a recovery in real disposable income and the stabilization in the housing market have heralded a soft landing feel that the Fed shouldn't mess up by overtightening.