If you look at the past five months of m/m US inflation, the average is +0.2% and that's enough to bring inflation back into the Fed's target range if it continues. Add in that real-time rents have stabilized and home prices are falling, and there's a good case that inflation will come down faster than anticipated.
I'd caution that could be undone by a tight labor market, upward pressure on wages and a surge of Chinese demand competing for goods/raw materials but the market is understandably enthusiastic. S&P 500 futures are up 2.7%.
The old saying is not to fight the Fed and they're forecasting a soft landing. Of course, they forecast a soft landing before every recession and their recent forecasting track record is worse than ever but the data is also pointing in that direction.
There's now even a bit of talk about the Fed only going 25 bps tomorrow, though I don't think that's a real risk. The debate should now shift to how long the Fed will keep rates around 5%. Powell and others have indicated it will be longer than markets expect but those kinds of 12-month forecasts from the FOMC aren't big market movers.
For now, the trade is to sell the US dollar and buy global growth. AUD is leading the way today, up 1.8% as it gets the double benefit of less-hawkish global central bankers and Chinese reopening. That's a powerful trend.
Another strong one is in gold, which is up $27 to $1809. That matches the high from earlier this month and from August. A break higher would be the best level since June.
