The Bond Vigilantes Are Fighting The Fed

After today's PPI, we won't be surprised if Fed officials plant a story in The Wall Street Journal over the weekend titled something like "Fed Officials Might Vote To Pause Rate Cutting Following Hot Inflation Data." The current consensus seems to be that the Fed will cut the federal funds rate (FFR) by 25bps on December 18. But it might be a "hawkish cut" with the FOMC's Statement and Summary of Economic Projections signaling a pause in rate cutting early next year.

If so, then Fed Chair Jerome Powell will amplify that signal at his December 18 presser. He certainly sounded somewhat less dovish on November 14 when he said, "The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."