The Fed sounded dovish on the inflation front today. As I have mentioned, there are only two prices worth worrying about. One is labor, up about 2.5% for 2016, and the other is energy. Oil is up from the $30s to the low $50s in the last year.
The real mystery is how oil prices are being kept up despite rapid growth in inventories of both crude oil and refined products, as well as domestic production. I have a sneaking suspicion that OPEC producers, at least, are selling product and partially offsetting their sales with purchases in the futures market, which is used to set contract prices, probably through proxies. We do know that speculative long positions in crude oil are at record levels (also in some other commodities, such as copper), and keep setting new records with each COT report. Someone has deep pockets.
Oil is the price to watch. As oil goes, so goes inflation – and the market, I suspect.