Deutsche Bank, through its macro strategist Henry Allen, is warning about a fragile equilibrium across financial markets. Equity, credit, and rates markets are simultaneously pricing in robust economic growth and limited additional tightening from the Federal Reserve, even as core PCE inflation remains stubbornly above the 2% target. Forecasts point to a 0.2% month-over-month increase in core PCE for July, translating to 3.3% year-over-year, and 0.1% for headline PCE at 3.6% annually. The strategist warns that a rapid repricing risk exists if inflation proves stickier than expected upon the data release on August 26 and the Jackson Hole symposium on August 27-28, followed by the September FOMC meeting.
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