Inflation data from last week was lower than the huge increases in March.

The Fed is between a rock and a hard place. They no longer have confidence in their forecasts as they have been wrong consistently for the past two years. They are at a point where they are going to need hard evidence that monetary policy is having the desired impact on consumption spending and inflation. They are looking backward in setting policy. This approach creates the risk they will overshoot in raising managed rates and withdrawing liquidity. The data from last week did not alter their view that inflation is well beyond acceptable levels with no indication it is coming down.

 

PROBANK AUSTIN ADVISOR - MAY 16, 2022