Overnight US markets sold off aggressively after a hotter-than-expected CPI inflation read left the optimistic Doves near-term rate cut hopes in tatters. Bonds and stocks both slid following the release, which climbed the most in eight months just when investors were expecting confirmation that inflation is under control; the US 2s climbed back to levels not seen since the December central bank “pivot” – another example of crowded positioning coming under pressure. The release added credibility to Jerome Powell’s “wait-and-see attitude”, with the futures now pricing in a Fed Funds rate of ~4.45% by Christmas, around four cuts.
