The Fed has to crush consumer demand with much higher rates if it wants to get inflation under control, Bank of America says
Meanwhile on the supply side, shocks peaked in early 2022, though they haven't fully eased yet, BofA said. At the same time, while disinflation is emerging, there haven't been signs of obvious deflation just yet. "The demand impulse for core goods inflation has faded considerably as spending has rotated back to services," analysts wrote."Supply-driven core goods inflation is also declining due to supply-chain normalization.
"A week ago, Fed Funds Futures gave 31 percent odds that policy rates would end the year higher than the FOMC's December 2022 Summary of Economic Projections guidance of 5.1 percent," DataTrek cofounder Nicholas Colas wrote in a note."Now, those odds are 63 percent."
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