Global Asset Allocation: The View From Europe

T. Rowe Price
By September 26, 2022 12:30

Global Asset Allocation: The View From Europe

It Fooled You Once​…

Coming out of the annual Jackson Hole meeting, Fed Chairman Jerome Powell’s speech, unsurprisingly, had a strong tone reinforcing the Fed’s intention to fight inflation at any cost, a 180-degree reversal of his ‘inflation is transient’ tone delivered the same time last year. But, just like last year when the Fed misread the growing threat of persistent inflationary forces and underacted, they may be misreading the trajectory of inflation once again. While lingering supply chain impacts from the pandemic and the RussiaUkraine conflict over the past year further exacerbated inflationary pressures, we are now starting to see key input costs—such as oil, lumber and copper— sharply decline. Recent jobs data have also pointed to higher participation rates, which should help ease the tight labour market and pressure on wages and while other ‘stickier’ components of inflation—such as rents and owners’ equivalent rents—are still on the rise, the pace has moderated in recent months. Although it is unlikely that inflation returns to the Fed’s 2% target anytime soon, it could be falling a lot faster than suggested by the Fed’s tightening, leaving markets to wonder if next year’s speech will be about rate cuts

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T. Rowe Price
By September 26, 2022 12:30

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