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Some relief on the inflation front/NKE and ACN comments/Other

Some relief on the inflation front/NKE and ACN comments/Other

Peter Boockvar
Sep 29, 2023
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I do want to first comment on the interest rate story and the worries about the state of US finances which in turn is a major factor I believe in the rate increase. Things don't really break here in terms of the US government finances being treated by the marketplace like an emerging market until the US dollar breaks. When you see US rates rising in addition to the US dollar falling, that's when we're in real trouble. 

Europe got some relief on the inflation front which is leading to a rally in European bonds and in turn US Treasuries and helping to lift stocks again. September CPI rose 4.3% y/o/y headline, 2 tenths below the estimate and a slowdown from the 5.2% pace seen in August. The core rate moderated to 4.5% from 5.3% last month and that was 3 tenths under the forecast. While energy prices fell 4.7% but should start rising again in the calculations, service prices slowed to a 4.7% y/o/y gain from 5.5% in August. Non-energy industrial goods prices were up 4.2% y/o/y vs 4.7% in August, 5% in July, 5.5% in June, 5.8% in May and 6.2% in April. 

After hearing from the ECB and Lagarde a few weeks ago and other members since, it seems that they've been looking for any reason to pause/stop the rate hikes and maybe today's figure gives them that hall pass to do so. That said, Lagarde reminded us this Monday that higher for a while is their mantra too, "Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary." This followed the Bank of France head Villeroy who said "we should now focus on the persistence of policy rather than the constant pushing of rates higher - duration rather than level."

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