Huff n puff

Whilst the market choked back its exuberance on a ‘softer’ inflation print this week in anticipation of some tight talk from the FOMC, it appears – despite all the huffing and puffing – nothing much has changed. Inflation is cooling, but it’s still gunning at a wide-eyed 7% clip and, with a labour market as tight at the 49ers defence, the hawks claws on the committee are out. Rate hikes might be cooling off the super-sized 75bp serving, but the trajectory is still up. And may stay up for some time. Commentators, meanwhile, jab fingers at the fast falling price points in many categories. Indeed, auction data suggests used car prices are about to see biggest chop to prices in decades. Bloated inventories weigh too, leaving said commentators muttering about outright deflation. Given J-Pow spent almost ten minutes talking about the hot-hot labour market, it remains a key focus to paring the still stubborn services inflation. That said, citing forward looking market indicators some suggest that the jobs scene is not so tight as widely believed and, by Q2 next year, non-farm payrolls will turn negative. Gulp. All told, the huffing puffing is set to continue. Also sliding out on the wires this week, but perhaps lacking the collective huff and puff, were two other items. The first was the IEA gazing at the moving plates of the market and raising oil demand forecasts for 2023. This, despite, the widespread recession ‘narrative’. Those in the know now think demand will hit 101.6 mb/d. Set against a tightening of the taps at SPR, the shale cohort under-clubbing, China back making moves on the floor and inventories low, the recent softening of the oil price may soon reverse and, potentially, rip back higher. Double gulp. The second release pertained to the Federal deficit, which hit another record. A whopper. Up and up it goes. With tax receipts falling and interest payments soaring, the nagging question of who is going to fund the whole beanfeast into a QT-toned 2023, is one that sulks quietly in the corner. With no mistletoe in sight.