The Federal Reserve's Initial August Inflation Forecast Has Arrived, and It Contains a Glaring Red Flag That Can Come Back to Bite Wall Street
A modest silver lining for headline inflation is overshadowed by one of the central bank's favorite inflationary measures.
Overview
Despite a turbulent March, it's turned into another banner year for Wall Street. The Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) both climbed to record highs this week, while the technology-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) blasted to an all-time high in early June.
But if there's one headwind that's fully capable of knocking this bull market off its pedestal, it's inflation. Trailing 12-month (TTM) inflation hit a three-year high of 4.2% in May before easing to 3.5% in June, and three of the 12 voting members of the Federal Open Market Committee (FOMC) dissented in favor of a quarter-point rate hike at the July 28-29 meeting. The FOMC is the body, including Fed Chair Kevin Warsh, responsible for setting the nation's monetary policy.
Fed Chair Kevin Warsh and the FOMC are contending with a challenging inflationary climate. Image source: Official White House Photo by Daniel Torok.
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Originally published at www.fool.com.