More from Harker: Would not take 50BP hikes off the table but not committed either

• Fed collectively underestimated impact fiscal spending would have on inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term
• Definitely correlation between yield curve Yield Curve A yield curve is a line used to help determine interest rates of interest rates for a specific bond, differentiated by contract lengths. This is useful for contrasting maturity dates, for example 1 month, 1 year, etc.In particular, yield curves help underscore the relationship between interest rates or borrowing costs and the time to maturity.Some of the best examples of this include US Treasury Securities, which are among some of the most observed worldwide by traders. By determining the slope A yield curve is a line used to help determine interest rates of interest rates for a specific bond, differentiated by contract lengths. This is useful for contrasting maturity dates, for example 1 month, 1 year, etc.In particular, yield curves help underscore the relationship between interest rates or borrowing costs and the time to maturity.Some of the best examples of this include US Treasury Securities, which are among some of the most observed worldwide by traders. By determining the slope Read this Term and recession
• Still need to look at a host of market signals, including inflation expectations and market sentiment
• Would not take a 50 BP move off the table for next meeting but not committing either.
• Developments in China another wrench in supply chain, could make 50 bps hike more likely appropriate
• Balance sheet reduction could add equivalent of two quarter point rate increases to fed tightening
• On average consumers are strong, but lower income families getting crushed by inflation
• Fed can move methodically to neutral rate of 2.5%. Then the Fed can assess what to do next
• Wants to start balance sheet reductions sooner than later with reduction schedule on Autopilot.
• FOMC has not decided on reduction amounts yet
• Active debate still over passive runoff of balance sheet verses asset sales.
• Broad consensus on move out of MBS holding , but pace of exit still being debated, as is the proper composition of treasury holdings.
• Very uncertain how high the Fed funds rate needs to go to bring inflation down
• Demographic trends in the US may mean continue tight labor markets

On the yield curve the 2-10 year spread has moved down to a new low of 5.5 basis points. That is the lowest level since September 2019 and getting closer and closer to inverting. As Harker points out there is a correlation between inversion and recessions (see weekly chart of the spread below).