Is the Fed Inflating? Is China Deflating?

Last Thursday, we wrote, "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." We were close. Nick Timiraos, the WSJ's ace Fed watcher, posted after midnight today an article titled "The Fed’s Game Plan on Interest-Rate Cuts Keeps Shifting." It was subtitled, "Investors widely expect a third-in-a-row rate cut this week. Officials are ready to slow—or even stop—lowering rates after that."

That doesn't rule out no rate cut in the federal funds rate (FFR) on Wednesday. Or else, if the FOMC votes for a rate cut, there might be more than one dissenter. The FOMC's dissenters will undoubtedly argue that the FFR isn't restrictive given the strength of the economy, stickiness of inflation, and record high prices for stocks, homes, bitcoin, and gold.