Why Today inflation Report is So important?

The policy of the Federal Reserve is based on trust. The ability of the central bank to keep prices stable depends on how much people believe it can do so. But after more than a year of raising interest rates and trying to slow down the economy, prices are still going up at a rate much faster than the Fed’s goal of 2%, and people are getting tired of it.

The Fed’s messages are becoming less and less related to how the market moves. Recent information shows that inflation is still high and that the economy is doing great. Jamie Dimon, CEO of JPMorgan Bank (JPM), voiced his skepticism about the Fed’s capacity to rein in inflation on Thursday, 23 Feb 2023.

When the January Personal Consumption Expenditures report comes out on Friday, Fed officials will be looking for any sign that their plans to stop inflation are working. But the reading is likely to show that prices are going up faster.

What’s happening: when people believe the Fed will keep inflation low and stable, they are more likely to have long-term price expectations that match the goals of the central bank. In turn, this can make it easier for the central bank to reach its goals for inflation.

But if people think inflation will go up in the future, they might ask for higher wages and companies might raise prices on goods and services. This can lead to a self-fulfilling prophecy in which people’s expectations of inflation become part of the economy. This makes it harder for the Fed to reach its policy goals.

Dimon eroded some of that trust on Thursday, 23 February 2023. “I have all the respect for [Fed Chair Jerome] Powell, but the fact is we lost a little bit of control of inflation,” the head of the largest US bank said in an interview with CNBC.

Dimon added that he expects that interest rates could “possibly” remain higher for longer and that it may take the Fed “a while” to return to its goal of 2% inflation.

Blackrock analysts wrote in a note Thursday that “we think we are going to be living with inflation. We do see inflation cooling as spending patterns normalize and energy prices relent — but we see it persisting above policy targets in coming years.”

According to money.yahoo.com

“Equity bulls and even Chair Powell have bragged about anchored expectations for inflation and how consumers and investors believe it is moving in the right direction,” said Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management.

Recent data, however, raises questions about whether inflation progress is stalling and whether the Fed will now need to “tread carefully.”

Officials at the Fed are very aware of this issue. At their last policy meeting, “a number” of people warned that not being strict enough with the policy could cause inflationary pressures to last for a long time, to the point where people start to expect inflation to stay high.

What To Watch: The Fed’s favorite way to measure inflation is by the PCE. If this data is better than expected, it could make it more likely that rates will go up by a half point more in March.

Why Today inflation Report is So important?
Why Today’s inflation Report is So important?

Analysts expect January’s core PCE, which takes out volatile data like food and energy, to go up 0.4% from December and 4.3% from a year ago. A reading of that size in January would be a little bit higher than the reading for December, but the annual data would be lower.

This information is officially published on cnn.com. 

Bookmark this page trending-news.org for more market-related updates.

About admin

As the admin of Trendingnews.org, I hold a significant responsibility in ensuring that the website runs smoothly and provides accurate and engaging content to our readers. My role involves overseeing the website's operations, managing the team of writers and editors, and ensuring that the website meets its goals and objectives. One of my primary responsibilities is to ensure that the content we publish is informative, engaging, and relevant to our readers. To achieve this, I work closely with our team of writers and editors to identify trending topics and develop compelling stories that provide valuable insights into the world around us. Additionally, I am responsible for reviewing all content before publication to ensure that it meets our quality standards.

Leave a Comment