CPI data, out overnight, very much the proximate cause of the market sell-off today, centred on tech stocks.

..but still viewed as anchored, on the assumption that the Fed follows through, as aggressively (or “expeditiously”) as stated.

Why look at the 5y 5y forward measures? Because we want to get at the inflation expectations embedded in market prices, that is past the “hump” of the pandemic, of the stimulus, of the reopening trade, to see what the market is thinking longer run, once we are past the near term noise.

Again, it is essential to stress/suggest that this measure, if the Fed doesn’t tighten now, will explode, and require an extremely heavy hand from the Fed later.

But, we think that it will follow through with policy tightening, as outlined above.

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