It was a very surprising number and very harmful for the bond market, given a number of Fed officials have been warning about rising inflation. We could be at the beginning of a gradual increase in CPI, which may lead to some insurance in the form of a rate hike by the Fed.
More Quotes from Rob Palombi:
The underlying trend is one of strong consumption growth and strong spending -- not something the Fed is going to consider particularly positive. The Fed's series of interest rate increases have not yet been enough to significantly deter the consumer from spending.Rob Palombi
There's still a lot of consumer demand out there, and as businesses try to restock their inventory levels they will increase demand, which will lead to stronger growth. That could be problematic for the Fed.
Rob Palombi
Greenspan's objective is to keep the U.S. economy expanding for as long a stretch as possible. That's why he's being so prudent in his speeches and that's why he'll adjust monetary policy to allow for that.
Rob Palombi
The general feeling is that the Fed can afford to bide their time on Oct. 5.
Rob Palombi
But it hasn't. The debt market expects Greenspan will achieve a soft landing, which means corporate earnings aren't going to crash and the outlook for corporate borrowers remains positive. That's driven yields lower, which in turn has kept borrowing costs lower for companies.
Rob Palombi
The bond market has been pricing in a premium against potential inflation. They've been looking at the numbers for some time and assuming that U.S. growth has consistently been strong enough to trigger inflation, and that is not a good thing for bonds.
Rob Palombi
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