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The Personal Consumption Expenditure index, which the central bank officially targets, has been running hot for more than a year.
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After months of surging inflation, the S&P 500 finally broke down into bear-market territory, ending a two-year-plus COVID recovery bull run.
The catalyst, of course, was Friday's surprising revelation that consumer prices soared by 8.6% in March - a report so toxic that Wall Street was still digesting it today.
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"The hot inflation report provided a double dose of bad news for the economy and for stocks," says Paul Christopher, Head of Global Market Strategy for the Wells Fargo Investment Institute. "First, it added to the pressure on households' real (inflation-adjusted) income, and second, it stoked the debate over more aggressive rate increases by the Fed beyond the two half-percentage-point hikes expected next week and at the late July policy meeting. … Interest rate futures contracts are now pricing in a third half-percentage-point rate increase at the policy meeting on Sept. 20-21."
And in fact, some experts warned that the Fed might yank even harder on the reins at this week's Federal Open Market Committee (FOMC) meeting.
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"With cost pressures showing no signs of easing, a 75-bp move cannot be ruled out at this week's FOMC meeting," says Priscilla Thiagamoorthy, economist at BMO Capital Mark
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