Ok, so the Fed is going to hike tomorrow.
And the best part about it is, we’ll get CPI and retail sales too, so hopefully they’ll be some kind of fun juxtaposition to lampoon.
But even if the data comes in hot and supports the case for normalization, one good print isn’t going to change the fact that the labor market and realized inflation are saying two different things.
That’s the whole dilemma at this point: overheating labor market versus subdued inflation, with the failure of the Trump agenda and the political overhang supporting a more dour assessment of the economic outlook.
And then there are bubbles to consider. Oh, and the fact that between the weaker dollar and record high stock prices, financial conditions have steadfastly refused to respond what’s supposed to be a “tightening cycle.”
They’ll be a presser and a dot plot and who’s excited for the SEP?!
It’s funny how everyone talks about how critical all of this is and yet when you sit down to write/think about it all, it sounds like the most mundane, coma-inducing subject imaginable. If, for instance, you end up having a hard time dozing off tonight, you might check out this post: “‘Oil Is The Fed’s Canary”: Is The Fed ‘Sleepwalking Into A Policy Mistake’“? That should be enough to put you down for the count. Or just drink a half bottle of Johnnie Black. Either or.
Oh, don’t forget about the balance sheet. They’re trying to figure out how to unwind that sucker and as Bloomberg notes, “that’s not an inconsequential question [because] it could mean the difference between the bond market having to absorb $1 trillion or $2 trillion of debt securities thrown off by the Fed in the coming years.”
Whatever.
Look, here’s the thing. Goldman’s Jan Hatzius and his six dwarfs (Alec Phillips, David Mericle, Spencer Hill, Daan Struyven, Karen Reichgott and Avisha Thakkar) spent a lot of time writing a summary of this for you and the least you can do is read it, because let’s face it, nobody reads most of this.
