US: Easy monetary policy to support further upside for equities – UBS

US inflation remains at its highest level since 2008, while core price increases are also well above the Fed’s 2% target. But the details of the consumer price release suggested that the inflation spike will prove transitory. Economists at UBS expect the Federal Reserve to look through the recent inflation figures, and accommodative policy to continue to support equity markets.

US inflation data suggests the Fed doesn’t need to act

“The detail of the report supports the view that inflation is contained and likely to fall in the months ahead. So we see the data as consistent with the Federal Reserve’s view that price pressures will start to fade and do not justify an early withdrawal of monetary stimulus.”

“Alongside solid growth and the rapid recovery in corporate earnings, we see continued easy monetary policy as helping support further upside for equities.”

“We think that cyclical and value sectors will be particular beneficiaries, and we continue to advise investors to position for reopening and recovery.”