US consumer prices and policy rate
In the United States, after the July 13 CPI release, as we watch bonds and stock markets, it is clear that the market does not understand what lies ahead.
However, it seems they expect that A) rate hikes → B) mild recession → C) decline in job openings & wage growth → D) price stabilization will happen relatively easily.
In the end, because the market does not know what will happen next, it is proceeding with short-term position adjustments repeatedly.
(1) In this cycle, what will the peak of the FF rate be? It is not known.
(2) The FF rate being below the core CPI rise rate has occurred after the Lehman Brothers crisis, and until then the FF rate > core CPI rise rate. What will happen from here?
(3) What the Fed fears most is a scenario like the 1970s. If CPI cannot be fully contained, it could keep rising indefinitely. Won’t that happen?
