SPONSORED CONTENT: After a prolonged streak of negative inflation surprises, driven by a series of unforeseen supply-side shocks, the moderation in Citi’s Inflation Surprise Index suggests that inflation has finally peaked. The index, which shows when i...
US inflation data also suggests inflation could have peaked at 8.5% in July from 9.1% the previous month. It’s reassuring to see inflation is drifting lower globally for the right reasons, including the easing of supply chain constraints and lower energy and food prices. The chart below shows the contributors to the most recent inflation print. Barring higher shelter prices, it indicates the key drivers of the easing in inflation are new and used cars, energy and food prices.
What’s more, the phrase “path back to two percent” rather than just “back to two percent,” implies some FOMC participants’ willingness to ease policy in the intermediate term, should there be “firm” evidence of inflation receding to the Fed’s 2% inflation target. This also tallies with the minutes of the last FOMC meetings, in which participants indicated “it would likely take some time for inflation to move down to the Committee’s objective.
Therein lies the opportunity. At Prescient, our point-in-time data analysis will guide us to position our funds for a peak in inflation in a timely fashion. We base our investment decisions on a rigorous process, with our investment themes guiding our decision-making, supported by statistically verifiable facts. But as human beings we are also optimists and the above data suggests a certain ambiguity to the prospect of a looming recession.
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