Rising Rent Could Make Inflation Sticky; Equities Face Fed Hurdle

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Rising Rent Could Prolong Inflation Fight; Equities Face Fed Hurdle

By Blu Putnam, Chief Economist
Erik Norland, Senior Economist
CME Group

Rising Rent Could Make Inflation Sticky

  • Rent rose 7.5% in December year on year from 7.1% in November
  • Headline inflation has retreated from a high of 9.1% to 6.5%
  • Rent accounts for a hefty 31% of the consumer price index
  • Rental costs often lag home prices by up to two years
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Equities Face Fed Hurdle in Next Move Higher

  • Fed indicates peak Fed funds rate of 4.75%-5.50% could be reached early in 2023
  • Stocks will be relieved when Fed returns to data dependency from inflation fighting
  • Market sentiment seems to be shifting to a more optimistic tone this year
  • Next equity rally could be marked by elevated volatility, frequent setbacks
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