The Fed funds market continues to price in a 25% chance of a 100 basis point cut.
The Fed may wish to go into next weeks meeting with less uncertainty in markets. That's especially the case after they leaked a larger hike in June.
There are some parallels between then and now. In June, a hotter CPI print led to the shift and this week CPI was higher-than-expected once again.
When would the Fed leak it?
FOMC decisions are always on Wednesdays. In June, the leak to the WSJ came on the Monday beforehand, in the US afternoon. Does that mean it will come at the same time? Possibly. But also keep in mind that the inflation surprise that month came on the Friday before the Fed, so they needed some time to digest that and strategize. This time, the Fed has already had three days to consider CPI. Yesterday's retail sales data and today's UMich sentiment survey (at 10 am ET) could also be factors.
Dovish surprises aren't the same as hawkish surprises
If the Fed wants to hike by 100 bps, there will undoubtedly be a leak between today and the FOMC decision. However Powell is still leaning towards 75 bps, then a leak might not be necessary. First of all, they might not have liked the precedent the leak set. It's taken away some of the communication power from the Fed and added volatility to everything the WSJ's Nick Timiraos (shown above) writes. Secondly, a dovish surprise isn't as big of a problem for the Fed. Hiking by 75 bps next when when there's a chance of 100 bps priced in is a positive surprise for markets. At the same time, a big rally next Wednesday in stocks could be seen to erode the Fed's inflation credibility.
Be on guard
In any case, dollar bulls should be on guard today. I suspect a leak will be tilting the Fed towards 75 bps -- especially if the UMich inflation expectations data is soft. Their prior playbook was for something in the US afternoon (about 3 pm ET was the release last time) so today won't be a day to quit early.