Inflation Moderates More, But How Will the Fed React?

There was some moderate good news on the inflation front, with seasonally adjusted overall inflation up 0.1% month over month in November. Significantly better than October’s 0.4%. Without seasonal adjustment, the year-over-year view was 7.1%.

Slowing inflation is certainly better, although as Nancy Davis, founder of Quadratic Capital Management and portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge Exchange-Traded Fund, said in an emailed note, “While Tuesday’s report showed a deceleration in inflation, which is great news, inflation is still very elevated and is over three times greater than the Fed’s 2% target, so this isn’t time for the Fed to take a victory lap.”