More tightening needed: US inflation ain't over til it's over

Inflation momentum in the US may at last be decelerating, but the threat is far from over. Despite 225 basis points of interest rate rises since March, by some measures US financial conditions are as loose as they were at the start of the hiking cycle. More is needed to bring inflation under control for the medium and longer term.

• US inflation momentum is tentatively decelerating with an 8.5% print for July, but the inflation threat is far from over.
• Despite 225bps of interest rate hikes this year, some measures of US financial conditions are at the loosest since the Fed started to raise rates in March - at odds with the considerable inflation pressure.
• The Fed needs to stay its course on tightening and not succumb to markets' implied pricing of rate cuts in 2023. 
• Financial conditions will need to tighten more, and stay tight, for inflation to be addressed in a sustainable manner.