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Inflation Slowed in July. How Will the Fed Respond?
While small-cap stocks were hard hit during the first half of 2022, August’s earnings season revealed a bounce back for the asset class. What does this mean for Trillium’s ESG Small/Mid Cap Core Portfolio?
Dear U.S. Environmental Protection Agency Administrator and Members of Congress,
July’s inflation report provided some much-needed relief for consumers and policymakers, but does it indicate that inflation has peaked and that a Fed pivot on interest rates will follow?
July’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports were a welcome change in direction. July’s CPI was unchanged on a seasonally adjusted basis after rising 1.3% in June, and the PPI declined 0.5% following a 1.0% increase in June. Core CPI remained elevated—still well above the Fed’s 2% inflation target.
While inflation softened more than expected, it is still abnormally high. Declining energy prices offset increases in food, housing and rent. Home prices have hit new highs while available inventory is below historic levels. Rent, which comprises a large percentage of overall inflation, continues to soar. The labor market also remains strong despite other economic weaknesses. The unemployment rate has returned to pre-pandemic levels and wage growth ticked higher than expected according to last week’s report.
How will the Fed interpret and respond to this data? Based on our current work, we believe inflation could be high for some time and that the Fed will continue to see cause for concern. In short, no pivot in sight on rate hikes in the foreseeable future.
July’s inflation report provided some much-needed relief for consumers and policymakers, but does it indicate that inflation has peaked and that a Fed pivot on interest rates will follow?
July’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports were a welcome change in direction. July’s CPI was unchanged on a seasonally adjusted basis after rising 1.3% in June, and the PPI declined 0.5% following a 1.0% increase in June. Core CPI remained elevated—still well above the Fed’s 2% inflation target.
While inflation softened more than expected, it is still abnormally high. Declining energy prices offset increases in food, housing and rent. Home prices have hit new highs while available inventory is below historic levels. Rent, which comprises a large percentage of overall inflation, continues to soar. The labor market also remains strong despite other economic weaknesses. The unemployment rate has returned to pre-pandemic levels and wage growth ticked higher than expected according to last week’s report.
How will the Fed interpret and respond to this data? Based on our current work, we believe inflation could be high for some time and that the Fed will continue to see cause for concern. In short, no pivot in sight on rate hikes in the foreseeable future.
July’s inflation report provided some much-needed relief for consumers and policymakers, but does it indicate that inflation has peaked and that a Fed pivot on interest rates will follow?
July’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports were a welcome change in direction. July’s CPI was unchanged on a seasonally adjusted basis after rising 1.3% in June, and the PPI declined 0.5% following a 1.0% increase in June. Core CPI remained elevated—still well above the Fed’s 2% inflation target.
While inflation softened more than expected, it is still abnormally high. Declining energy prices offset increases in food, housing and rent. Home prices have hit new highs while available inventory is below historic levels. Rent, which comprises a large percentage of overall inflation, continues to soar. The labor market also remains strong despite other economic weaknesses. The unemployment rate has returned to pre-pandemic levels and wage growth ticked higher than expected according to last week’s report.
How will the Fed interpret and respond to this data? Based on our current work, we believe inflation could be high for some time and that the Fed will continue to see cause for concern. In short, no pivot in sight on rate hikes in the foreseeable future.
No genuine effort to slow or combat climate change can ignore Energy and Power. Trillium seeks to find the companies best-positioned to lead―and benefit from―the ongoing energy transition. Learn more about our approach to investing in Energy and Power.
Advocacy Impact Report - Second Half 2021
Trillium considers it fundamental to our mission and our fiduciary responsibility to engage with the companies that we hold in our portfolios to press for positive change that we believe will help improve ESG policies, performance, or impact. Learn more about our recent engagement activities.
