Inflation Crossroads

Last week we received data releases regarding home prices and consumer confidence. Not surprisingly, the numbers indicated that home price inflation is still running relatively high (although showing signs of softening) and that high inflation remains a drag on consumer sentiment. While there’s currently debate over where inflation is headed next, we’re seeing mounting evidence that it may soon be on the decline, including: Commodity prices, transportation costs for goods, and airline ticket prices are all trending lower; Retailers’ inventories are growing and car production is rising; Rents and home prices are moderating; A higher dollar is helping to lower import prices. If inflation starts to come down faster than expected, that could result in fewer rate hikes from the Fed, which will have impacts across financial markets. Looking ahead to this week, the employment report for June will be released on Friday. The consensus expects to see strong but weakening numbers (250,000 jobs in June vs. 390,000 jobs in May).


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