1/3
Friday's CPI report had a BIG impact on market thinking.
The probability of the Fed hiking 75 at this Wed's FOMC meeting is 23%!
Yes, it is less than 50% so it is not likely. But it should not be at even 23% unless the market thinks CPI "panicked" the Fed at some level.
Friday's CPI report had a BIG impact on market thinking.
The probability of the Fed hiking 75 at this Wed's FOMC meeting is 23%!
Yes, it is less than 50% so it is not likely. But it should not be at even 23% unless the market thinks CPI "panicked" the Fed at some level.
2/3
Assuming the Fed hikes 50 this week. The probability that Fed hikes 75 on July 27 (next mtg), is 55%, up from 20% the day before!
Will Powell be asked if 75 is one the table?
In May he said a 75bps hike is not being βactivelyβ considered.
The mkt thinks this chged on Fri.
Assuming the Fed hikes 50 this week. The probability that Fed hikes 75 on July 27 (next mtg), is 55%, up from 20% the day before!
Will Powell be asked if 75 is one the table?
In May he said a 75bps hike is not being βactivelyβ considered.
The mkt thinks this chged on Fri.
Finally, the terminal rate has gone from ~3% on Memorial Day (blue line), to ~3.25% last Tue (orange), to nearly ~3.75% on Fri (red).
Bottom line, CPI has the market thinking the Fed is jacking rates A LOT in the next few months. Stocks crumbled on this realization.
Buckle up!
Bottom line, CPI has the market thinking the Fed is jacking rates A LOT in the next few months. Stocks crumbled on this realization.
Buckle up!
Bonus #1
The Fed has no choice but to be aggressive. They used their "too dovish" card last year ("transitory"). Cannot do that again.
Remember May payroll was 390k, 11+m open jobs. They can crush stocks ("tighten financial conditions") without >unemployment, so they will.
The Fed has no choice but to be aggressive. They used their "too dovish" card last year ("transitory"). Cannot do that again.
Remember May payroll was 390k, 11+m open jobs. They can crush stocks ("tighten financial conditions") without >unemployment, so they will.
Bonus #2
The Fed only has one tool to bring down inflation. Make stockholders poorer so they stop buying crap!
And yes, this can work as a lot of US inflation is "excess demand," as explained here.
The Fed only has one tool to bring down inflation. Make stockholders poorer so they stop buying crap!
And yes, this can work as a lot of US inflation is "excess demand," as explained here.
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