I’ve discussed the risk of transitory disinflation before, and it manifested itself in the form of hotter-than-expected January CPI and PPI reports. The reports rattled the bond market and expectations of the first quarter-point rate cut has been pushed out from May to June and a slower rate cut trajectory for the remainder of year.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8WEkG2WT0wzsVq5moBGnummVv5nv1U376fV6sxv5NrMn28uRQysHVjJI9blnenh2JOn50xUJ5wJ5ODhDfUy4Q7eS_Py0Ed03ADoJ-elwytsKZSizTJ3K98I3l0vgFVvAowY3EO7IXiKD1LAsBlGfaZbaWNRnOgWdh8HcJzDtHI3NJfaHdqbf2n2WRCTtl/w400-h335/Fed%20Funds%20probability.png)
The latest BoA Global Fund Manager Survey showed that only 4% of respondents expect higher rates and 7% expect higher inflation. It was therefore no surprise that bond prices skidded badly in the wake of the CPI report.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhH_S9DjOLgwjecoht36am5vuxftndFBwzglakyUu6zp-aownMwJtgYXMxHNt6Y1MdvsC7ZWL-uDmv3mkWsLlcOHw6zdHzC2JRtlY-SMXM_ZU8vb154yriUxDQXStvZ6-IZhULpe0y8f5Fc8V_YD5gW5nM4EYq649eDhUrDXZB8Go8RwIPl1JGpi1QFb3G1/w400-h233/FMS%20rate%20expectations.png)
Do the stronger-than-inflation reports mean a pivot to a “higher for longer” narrative? Here are bull and bear cases. The full post can be found here.