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1/2 The probability of a Fed hike in Sept was 107% yesterday, but now it is 56%. "Bond traders can stop panicking when the Fed starts panicking." Under 50% = no Fed panic about inflation If no Fed panic, then the bond market will slow inflation with even higher yields. https://t.co/fi41dRZaBE 2/2 If, in the coming weeks, the Sept probability (above) falls below 50% and bond traders "panic" about inflation sending yields higher, how can the Fed reverse this before the Sept meeting? The Fed now has 12 independent voters. Three want to hike rates now. If Waller gives a speech saying he's ready to hike, that would be four to hike (I'm surprised given his "Sternly staring at inflation until it melts before our withering gaze is not an option" comment from earlier this month; he did not dissent yesterday). After Waller, Jefferson or Cook (Powell???) can do the same and send the message to Wall Street. --- To repeat, this is an independent Fed, and Wall Street is still struggling with what that means. You can see this in the hand-wringing about the presser, under the assumption that Warsh makes the decision. Warsh has a committee that votes policy with him (the "family fight"). The committee can signal a hike without Warsh saying a word.