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Weekly Economic Monitor -- Inflation Hysteria and the Fed

By: Scott J. Brown, PH.D., Raymond James

Inflation Hysteria and the Fed – The CPI rose more than expected in April, adding to inflation worries. The University of Michigan’s Consumer Sentiment index dipped in the mid-March reading, reflecting growing concerns about inflation and potential rate hikes. Yet, Fed officials, while acknowledging risks, have remained calm.

This Week – The economic data are second-tier and unlikely to be market moving. Residential construction activity is likely to have improved in April. The Index of Leading Economic Indicators should be up by about 1.6% (no surprise, it’s a published formula and most of the components are known), led by the drop in jobless claims. FOMC policy meeting minutes (from late April) should reinforce the Fed’s view, may not cover new ground, but quotes taken out of context have the potential to influence the financial markets.