Markets were Right about the Fed and Inflation

This shouldn't be surprising to readers.

I’ve been writing for months now that markets seem to indicate that we were near the Fed’s tolerance for longer-run inflation expectations, and the mild negative reaction to the Fed’s comments this week seem to support that view.

The S&P 500 closed below it’s May 7th high yesterday, after comments from FOMC Chairman Powell indicated the Fed could start hiking interest rates earlier than previously indicated. Also, 5 year inflation expectations, for example, have fallen consistently from highs reached in May.

This helps put the some of the inflation hysteria into context, doesn’t it?