Can Cooler Inflation Keep Stocks in a Goldilocks Zone? | Presented by CME Group

Before [music] the August PCE release, a hotter thanex expected reading appeared to pose a greater near-term risk to stocks because it could push interest rate expectations higher. By contrast, a moderately cooler reading was more likely to be viewed as Goldilocks, disinflation with intact demand than a growth scare, consistent with the market's initial reaction to the August data. Headline and core PCE data were below expectations. However, still above the Fed's target rate of 2%. The cooler reading did not trigger growth fears because it arrived alongside evidence that the economy is still expanding at a decent clip as GDP was revised higher. Fed Chair Kevin Worsh has been explicit. Inflation has run above the 2% target for years. financial conditions are not clearly restrictive and the committee will act if underlying inflation is not moving towards the target clearly and at sufficient speed. A cooler but nonrecessionary reading like the recent August data is typically welcomed because it eases rate path concerns without immediately putting earnings at risk. >> [music]