The bad news is that 7.7% y-o-y inflation is still the highest in 40 years and all the cumulative price increases over the past year and a half is not going to reverse. Inflation is decelerating — and it should mathematically, given the rising base effect.
The latest US CPI for October, which slowed to 7.7% y-o-y, strengthened the deceleration trend in inflation — it was the fourth straight month of decline, from the peak of 9.1% in June.
That is the good news — that the momentum for price increases is moderating. Stocks staged one of the biggest one-day gains in over two years, on expectations that the US Federal Reserve can now slow rate hikes going forward. Indeed, this is in line with our own expectations that interest rates are nearing peak levels, though the market euphoria is, we think, an overreaction.
