Chart of the month: price pressure persists

At the beginning of the year, hope grew that the US economy could be coming in for a soft landing – consumer data was strong, and inflation looked to be falling rapidly.

But we’ve recently had a few signals that activity is stalling, with data revisions now pointing to more price pressure at the end of the year. As you can see in the chart, service sector inflation looks particularly sticky.

Under such circumstances, consumer strength is actually a headache for the US Federal Reserve (Fed). How is the Fed going to get prices to stop rising when everyone is out spending money? The answer could be more aggressive rate hikes and a narrower path to a soft landing.

And if 2022 taught us anything, it was that’s not a good backdrop for markets.