Higher interest rates and tighter financial conditions are clearly now impacting demand. It took 3-4 months to take effect, but the combination of those two things is doing what the Fed wants to do to fight inflationary pressures: purposefully destroy economic demand. Housing slowing, lumber prices down, gasoline at the pump prices down. Demand down, prices down.
Both the Empire State and Philly Fed manufacturing indexes (it’s what CIOs read on summer Friday mornings with a cup of coffee) are noting lower prices received. Elevated prices still, but lower and tending in the right direction. The Fed will read these too and be happy that prices are falling and demand is softening. The inflationary antibiotic is starting to work.
Chief Investment Officer
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