Is Inflation Finally Ready To Fall?

Is Inflation Finally Ready To Fall?
Jonathan Hobbs, CFA

over 1 year ago1 min

Mentioned in story

If you’ve been wondering when inflation might start to taper off, the Bloomberg Commodity Spot Index (BCOMSP) – which tracks a range of materials that feed into your daily cost of living, from energy to coffee – suggests it might be right around the corner.

That’s because the index is considered a leading indicator of where inflation will head next. Now, it’s true that this relationship doesn’t always hold, in part because there are other things that drive inflation besides the cost of commodities. But it’s generally a pretty reliable bet, not least because food and energy are the primary drivers of global price hikes. And given that the index fell nearly 14% last month (gray line), consumer prices (blue line) will probably follow soon enough.

It certainly seems like investors are feeling more confident that we’ve hit the peak: the S&P 500 barely budged yesterday, even as fresh data emerged showing US inflation at a near 41-year high in June. So if inflation really is beginning to cool off, the Federal Reserve might be able to go easier on interest rate hikes than markets have been anticipating. And that could give stocks and crypto some much needed breathing room.

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