By Mark Hackett
In the impressive market recovery since last March, the S&P 500® Index rallied 77%, largely in response to unprecedented monetary policy accommodation by the Federal Reserve. The FOMC cut the Fed Funds target rate to 0% on March 15, 2020 and accelerated its bond-buying program to provide liquidity and avoid a deflationary spiral. Concerns were growing that the economic shutdown and shifts in consumer behavior would keep inflation below the Fed’s 2% target. At the recent FOMC meeting, Fed Chair Powell reiterated the central bank’s commitment to a dovish monetary stance until inflation targets are achieved. The data continues to show modest inflation, with consumer price inflation (CPI) up just 1.4% from a year ago despite pressure from commodities and housing. This marked the 11th-consecutive month that CPI was below the 2% target. Since the target was first announced by the Fed in 2012, inflation has exceeded 2% in 38% of months, but only five times in the last 26 months.