Refocusing on the Inflation Fight
- The resolution of the debt limit and the easing of banking stress have removed near-term downside risks and shifted market participants’ focus back to the inflation fight.
- Disinflation and robust labor demand in recent months have fostered continued hope for a possible soft landing and confounded expectations for a recession.
- Attention among both market participants and Federal Reserve officials has refocused on the fundamentals of the economy.
- The Fed has projected a new cycle high for the terminal policy rate and rates markets have embraced a higher-for-longer path of policy.