After the release of the first US inflation statistics of the year on Thursday, based on the trend of the preceding months, investors anticipate possibly volatile trading conditions.
The market jumped after the CPI came in 20 basis points below experts’ expectations in November and December. However, the S&P 500 last time erased gains of up to 2.8% during the normal trading session to conclude the day only 0.7% higher.
Stock Market Trends
The mainstream is changing away from the idea that peak inflation has passed in favor of the idea that inflation has to fall much lower before it starts to decline.
Following the CPI statistics, the S&P 500 and Stoxx Europe 600 Indexes both had daily increases over the previous three months as well as over the previous four days. There had been a string of primarily negative market reactions prior to then due to growing indications of monetary tightening.
After two Federal Reserve members stated on Monday that the institution will probably need to hike interest rates over 5% before halting and holding for a while, European stocks today fell along with US share futures.
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Perhaps US Inflation Is Not That Bad
However, many now doubt the effectiveness of the macroeconomic models that forecasters use to try to comprehend what’s happening in the economy because they were unable to predict the spike in inflation that resulted from the pandemic.
However, perhaps the data being put into the models rather than the models themselves is the issue. It has traditionally covered the linkages and trends that the post-World War II economic development has shown.
That is precisely what Stephanie Schmitt-Grohe, a professor at Columbia University, accomplishes in her analysis of the recent rise in inflation to multidecade highs. Her data analysis, which dates back to 1900, also leads her to believe that the current price boom may not be as alarming as many people think.
In her examination of the recent surge in inflation to multidecade highs, Stephanie Schmitt-Grohe, a professor at Columbia University, succeeds in doing just that. She also comes to the conclusion that the present price bubble may not be as concerning as many people assume based on her research of data going back to 1900.
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