'No More Fed Hikes!' Economist Declares End Of Inflation Frenzy, Urges FOMC To Stop Tightening Now

Renowned economist Robin Brooks, chief economist of the International Institute of Finance, tweeted that “the US inflation shock is over” as the Federal Reserve prepares to announce its interest rate decision later Wednesday. 

Brooks, who previously worked at Goldman Sachs and the International Monetary Fund, said the distribution of inflationary pressures within the CPI basket has significantly narrowed, dismissing previous concerns about widespread price increases.

US Inflation Falls Off Cliff: No More Rate Hikes?

The IIF economist said the combined weight of items with inflation higher than 2%, a gauge of the inflation breadth, has reached the lowest level since February 2021.

According to Brooks, the intensity of inflation is no longer cause for concern, as an increasing proportion of goods and services included in the CPI basket demonstrate disinflationary trends.

May’s Consumer Price Index inflation gauge fell more than expected, decreasing from 4.9% in April to 4%. Producer Price Index inflation also experienced a similar decline last month, dropping from 2.3% in April to 1.1%, marking its lowest level since December 2020.

As a consequence of this weakening trend in inflation, Brooks is urging the Fed to stop hiking interest rates.

Market Predictions For Fed Policy

At Wednesday’s FOMC meeting, the market fully expects a pause, with the Federal Reserve maintaining rates within the 5%-5.25% range. The July meeting remains a close call.

Traders assign a 60% chance of an interest rate increase in July, which marks a decrease from a 75% probability a week ago, as reported by the CME Group FedWatch tool.

Chart: Inflation Falls In 2008-Like Fashion