Jan. 16, 2023
Last week was marked by inflation data in the US. They coincided with consensus expectations. This immediately eased the pressure and gave way to optimism that 2023 could loosen its grip. The S&P 500 rose, 10-year bond yields fell and the US dollar retreated against a basket of currencies. This is the complete opposite of 2022. Nonetheless, price pressures remain high, but if a similar market condition persists we could see a noticeable easing in the pace of Fed tightening.
Last week's data supports the idea of a pause by the Fed. Expectations are for one 0.25 basis point increase in February and another in March. This would reach the 5% target, where a pause in tightening is very likely.