Discussion
It’s pretty clear the Fed is going to lower projected cuts to 2 in the March SEP from 3 in December. Perhaps they will even lower the number of cuts in 2025. But debating cuts during a second inflation wave is laughable. Powell D/B/A Burns.
However - if Powell comes out Wednesday and says “The Committee is prepared to hike again if recent trends in realized inflation data continue,” that would be a relatively big hawkish shock.
Everyone and their brother is calling Powell Burns right now, and for good reason. But he has a tendency to surprise in his communication just enough to combat the consensus narrative. With VOL starting to pick up, IG CDX finally moving, and rates moving back to YTD highs (why it took PPI to prompt this cross-asset market shift and not CPI is beyond me), Powell either surprises hawkish or stays in line with Yellen and Brainard so not to allow an overly aggressive FCI tightening.
We shall see.