Inflation has slowed in parallel with an increase in US consumer expenditure in April, as people increased their purchases of goods and services. However, while we have hit peak inflation, we have not yet reached peak fear, according to Isaac Poole from Oreana, who adds that things might worsen, and some factors could catalyse this. The Fed’s predicted 100-basis-point rise in June and July is one of these drivers. Even though these rises are priced in and expected, Isaac predicts that investors will continue to tighten their belts, implying risk and uncertainty in the short future. He says that one of the most severe macro dangers facing the world is the possibility of a policy mistake, notably from the Fed. While markets are pricing in a rise of more than 3%, Isaac believes that if that happens, it will increase too quickly for the economy and financial markets to manage, which is the perfect formula for central banks to trigger recessions.
(Source: Ausbiz)

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