Some astounding developments, but not enough these days to shake financial markets. Why fret a complex and increasingly unstable world, not with the timely return of Goldilocks. She’s back… Headline U.S. April CPI was up 0.2% vs. expectations of 0.3%. Core CPI was up only 0.1% against expectations of 0.2%. April Import Prices were up 0.3% vs. estimates of 0.5%. Forget surging energy prices, rather quickly the rosy narrative shifts to peak inflation.
May 11 – Reuters (Howard Schneider): “St. Louis Federal Reserve Bank President James Bullard on Friday spelled out the case against any further interest rate increases, saying rates may already have reached a ‘neutral’ level that is no longer stimulating the economy… ‘We should be opening the champagne here,’ not raising interest rates with unemployment low and inflation in no seeming danger of accelerating, Bullard said… ‘The economy is operating quite well right now.'”
I suggest the Fed and global central bankers hold back on carting out the bubbly. “Opening the champagne” is reminiscent of Citigroup CEO Chuck Prince’s summer of 2007 “still dancing.” Bullard focuses on traditional yield curve analysis. “I would say the yield curve inversion is getting close to crunch time.” “The yield curve inversion would be a bearish signal for the US economy if that develops.”
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