The latest consumer price index brought a collective sigh across Wall Street this week. Inflation has peaked, sang many economists, strategists, and headlines. But the logic behind the optimism is flawed.
First, consider the inflation report that followed CPI. The producer price index is often blown off because what matters most for the economy is what is happening with consumers, who make up two-thirds of gross domestic product and whose expectations for future prices help determine actual inflation. But investors should take the March PPI, which rose a record 11.2% from a year earlier, even more seriously than the corresponding CPI.
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