Bank of America strategists said that sky-high inflation could take some time to come down – force the Fed to raise rates so aggressively the economy slides into a recession.
Mark Grant, chief market strategist at Colliers Securities, argues that he believes the Consumer Price Index and Producer Price Index data will be higher than the previous month.
In a Friday note, the bank's strategists said market pricing suggests inflation will fall to or below the Fed's 2% target within the next two years – but that a major economic downturn is needed in order for that to happen. The Bank of America analyst note comes just a few days before the release of new consumer price index data, which is expected to be another doozy: Economists surveyed by Refinitiv expect that inflation surged 8.8% in June on an annual basis, another 41-year high.
Fed policymakers in June approved a 75-basis point interest rate hike – the first since 1994 – pushing the federal funds target range to 1.5% to 1.75%. Another hike of that magnitude is on the table in July amid signs of stubbornly high inflation, Chairman Jerome Powell told reporters after the meeting, prompting investors to reassess the economic outlook.
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