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The Hawks Are Out
A pair of born-again Fed hawks suggested Monday it's too soon for markets to assume we've seen the last hike of the cycle.
"I think we’re going to have to grind higher with the policy rate in order to put enough downward pressure on inflation," Jim Bullard said, while speaking at an event in Fort Lauderdale. "I'm thinking two more moves this year."
Fair enough, but "I'm thinking" that'll be hard to pull off from an r-double-star perspective (just ask the ghost of SVB), even if Bullard may we
Regardless of data, I think June has to be a pause because of the debt ceiling imbroglio. It wouldn’t make sense for the Fed to risk catching even a little share of the blame, however illogical that would be.
So two months for inflation data to show . . . we’ll see, but rent does not seem to be disinflating per plan. Apartment REITs have reported high single digit realized rent gains, with renewals outpacing new leases. Indicies of asking rents are accelerating, and those will be next months’ new leases.
Inflation expectations are rising, with ordinary folks increasingly thinking 3% and managements of like mind.
The job market seems rather too buoyant as well. As for the stock market . . .
By the July 25-26 meeting, the FOMC will be looking at no meeting in August, so if they continue the “pause” then there’s no scheduled opportunity until September. Will the data make the Fed comfortable with a three month pause, or even a 25 bp hike which will be only 8 bp/month?
I think the 0 bp June, 50 bp July scenario is more possible than the market wants.