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I believe that the plunging commodity prices, the steep drop in gold, and the decline in energy prices are indicative that inflation has peaked for the cycle. Moreover, the shape of the yield curve suggests that the bond market is more worried about future growth than inflation.

Nonetheless, the members of the FOMC still seem to be worried about inflation. Here are some comments from the release of the most recent minutes from their last meeting:

• Core inflation 'undesireably higher'
• Concern inflation won't decline as forecast
• Fed credibility would suffer unless core rate fell
• Housing in particular continuing to moderate
• Growth likely to quicken next year

I trust the bond market more than a group of central bankers, who have a history of pushing monetary policy too far (in both directions). I am still hopeful that they can achieve the desired soft landing, but this remains to be seen.

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