Inflation, the Fed, and Recession. It’s Not Linear.

The June CPI number came in at 9.1%. This is not only the second consecutive month that we’ve seen an increase – it was a whopper. Consensus expectations were for an 8.8% annualized increase in inflation. This huge spike came after the Federal Reserve raised interest rates by a surprise 75 basis points after the June meeting and communicated that more – and higher – rate increases are in store.

As measured by the futures markets, the immediate response was to assume that the high inflation number would increase the likelihood of the Fed enacting at least a 75-basis point rate increase and potentially a 100-basis point increase at the FOMC meeting at the end of July.

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