🔴 US inflation is back above 4%, more than 2x the Fed’s target.

▫️ Annual CPI: 4.2% (forecast: 4.2%)
The number came in exactly as expected.
This is essentially a non-event, which is why the market reaction remains relatively muted.
After Friday’s much stronger-than-expected jobs report and yesterday’s solid housing data, investors were mainly worried about another upside inflation surprise.
CPI did not validate the worst-case scenario.
Core CPI even came in slightly more reassuring on a monthly basis, fueling the idea that the inflation spike linked to the oil shock could gradually be fading.
But be careful not to overreact to this release.
Inflation still rose to 4.2%, its highest level since April 2023 and more than double the Fed’s target.
This CPI likely avoids the worst-case scenario in the short term, but it does not change the underlying problem.
▫️ Rate cut odds continue to decline.
▫️ The “higher for longer” scenario remains in place.
▫️ And the risk of a more hawkish Fed continues to be priced by markets.
Our take at OAK? This CPI probably avoids the worst outcome in the short term because it did not come in above expectations, but it does not solve the market’s core issue.
Inflation remains too high, the U.S. economy continues to show signs of resilience, and the Fed has fewer and fewer reasons to cut rates anytime soon.