The latest inflation data in the US were greeted by financial markets because inflation declined more than expected. However, upon closer inspection, the picture is mixed. On the one hand, there is mounting evidence of disinflation (easing of input price pressures, shorter delivery times, decline of goods price inflation) but on the other hand food inflation remains high and shelter is a major contributor to inflation. Prices in certain services rise at a fast pace due to rising wage costs. On balance, this implies that the Federal Reserve will continue to hike its policy rate in the near term and will keep a firm tone thereafter. It will be in no hurry at all to start easing. For that we will have to wait until 2024.
