Source item
Open original source ↗The old market adage that markets will "move to the level of most confusion" could apply to a WEAK CPI report tomorrow.
The probability of a Fed hike ended at 73% today. The meeting is next Wednesday.
A weak CPI report tomorrow could throw this assumption into chaos, leaving everyone confused and unsure what is next.
As I often say:
"Bond Traders will stop panicking when the Fed starts panicking."
If the market thinks the Fed STILL hasn't found a reason to hike, slicing through 5% on 10-year yields might only be the beginning.
Quoted context
These are the quoted author’s words.
Warsh's Jackson Hole speech convinced investors a rate hike was more likely but didn't tell them what would trigger one. Markets filled the gap and are now pricing a hike Warsh never promised. Which leaves Friday's inflation report viewed as the thing that will authorize or block a rate hike, the kind of decision-making Warsh has spent years arguing against. "This is the market testing you. This is the 'double-dog' daring you. This is straight schoolyard," says Vincent Reinhart, a former senior Fed economist.
NickTimiraos ↗