Wells Fargo's Michael Schumacher: Close to the beginning of the end of hot inflation

Group 1: Inflation and Market Expectations - The current CPI numbers indicate that inflation is rising but not at an alarming rate, suggesting a cautious outlook for the Fed's future actions [1][5] - The market is expected to anticipate more aggressive Fed activity, leading to a potential decrease in yields, particularly in the two-year and three-year segments, by approximately 20 basis points over the next month [2][3] - There is a debate regarding the sources of inflation, with some analysts suggesting it may be structural rather than solely tariff-based, which could impact the anticipated Fed cuts [4][5] Group 2: Labor Market Dynamics - The labor market has shown signs of softening, with secondary indicators such as job openings and the quits rate declining significantly from late 2022 to mid-2024 [6][7] - The layoffs rate has remained steady, with a slight increase recently, indicating potential underlying weaknesses in the labor market that could concern Fed leaders [8] - The disconnect between labor market data and other economic indicators raises questions about the overall GDP pace and the Fed's response to these trends [6][8]