Fed losing patience with inflation progress, near peak "hawkish" vs futures. Retail looks to be near capitulation

Investors appear to have given up all hope for any soft landing post the Sept FOMC (9/21). Looking at market reactions, post-FOMC:

  • Fed Funds futures now pricing 4.75% Fed Funds rate by June 2023
  • Inflation breakevens 1-year forward have dropped to 1.97%
  • Fed Funds implied June 2023 +38bp
  • Inflation 12M forward dropped -32bp
  • Implied Fed funds above the Fed's projection of 4.6% by YE 2023
In other words, one possible way to explain this divergence of the Fed Funds terminal rate up sharply BUT inf...

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