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Last week’s hot inflation and Powell’s hawkish comments from this week has made markets start to run with the higher for longer narrative which has ripple effects across assets. Nevertheless there are dovish themes to be found in macro data. 

If you change the owner’s equivalent rent and used vehicles parts of the CPI basket with real time components such as Zillow Observed Rent and the Manheim index for used cars then inflation in year-on-year terms is printing a tad above 2%. With regards to the labor market we find a divergence between the household vs payroll survey. The full time employed is now printing at -1% year-on-year indicating a weak labor market.