Has U.S. Inflation Peaked?

Weekly Market Update | April 18, 2022

Highlights

The MSCI AC World Index pulled back 1.7% last week – its second consecutive week of losses. In the United States, the S&P 500 dropped 2.1% while the interest-rate sensitive NASDAQ tumbled 2.6%. European, Japanese, and Emerging Market stocks each lost 1.2%. The 10-year U.S. Treasury yield jumped another 13 basis-points to 2.82% as investors weighed an accelerated runoff of the Federal Reserve’s balance sheet.

U.S. inflation rose to 8.5% in March – its highest level since December 1981. This level was well above what the Federal Reserve considers to be consistent with price stability. However, there are some signs that we may be nearing peak inflation with used car prices falling and crude oil prices coming off their March highs.

By the end of 2022, U.S. inflation could fall within a range of 5.5% - 6.0%. This is unlikely to cause the Federal Reserve to reverse its decision to tighten monetary policy, but it would be welcome news if accurate. It may also mean that Treasury yields are nearing a peak.

The next Weekly Market Update will be released on May 2, 2022.