Friends, in addition to yesterday's post. Inflation fell, but along with it, bottom line, so did the market.
After the decline in the SPI, the market immediately plotted an outcome in which the Fed would also cut the rate, but no. That didn't happen, as such a drop in inflation is not enough for Powell.
But, that's okay. The major decline in inflation is ahead of us. Why?
Annual inflation is the main indicator. What is annualized inflation? It is a period of the last 12 months.
๐ Last year in May, inflation was +0.1%. This year in the same month it came in at 0.0%!ย BUT, the next month last year was already +0.2%, July was +0.2%, and August was all +0.5%. Get the point?
If the next months this year inflation will continue to remain at 0.0%, it means that in the next 3 months annual inflation could fall by as much as 0.9%!
And that's a clear positive.
And in annualized terms it will go below 3%, and then the Fed will definitely go for a rate cut. Let's see how the summer goes, but the closer we get to August, the closer we get to the point of market flight!
โ BUT - this is just speculation that will only happen by the end of the summer. And we have 3 months ahead of us, during which anything can happen (fall) ๐ฅ