IWM - The Disinflation Narrative Has Been Shattered

2024-03-29 11:31:17 ET

Summary

• Troubling trends in goods inflation and a rebound in energy prices challenge the goal of reaching a 2% inflation target.
• The February PCE report shows revisions that are not favorable, with higher core PCE and a significant jump in goods inflation.
• Services inflation remains high and energy prices are on the rise, indicating that inflation rates may continue to trend higher.

The February PCE report throws the whole disinflationary narrative out the window. The report reveals troubling trends that are now developing within goods. With service inflation remaining sticky and a rebound in goods inflation, mainly driven by energy prices, returning to a 2% inflation target will be more complex than thought. This is why the market is now pricing in fewer than three rate cuts in 2024, following the report....

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