Does the Fed care about inflation anymore?
Ever since the higher initial jobless claim and weaker job report, market's assumed we're basically very close to a recession. Claudia Sahm doesn't believe the Sahm rule is correct this time, but theoretically whenever it triggers, the US is already a few months into a recession.
So now obviously Powell is gonna be solely focused on the employment side. He seemed to lean towards that side already in July. Fed Hawks like Bowman, Barkin, Waller, Schmid, Logan, Musalem can probably be convinced to cut 25 bps in Sept, because the doves agreed to not cut in July.
The Fed had typically wanted core PCE MoM prints to come in between 0.20 to 0.25% to get a rate cut in Sept. We'll get PPI and CPI in 2 days, which would allow economists to calculate the core PCE. Do we even care what the inflation prints come in at this point, as long as it doesn't go above 0.30% MoM? Market's already pricing in a guaranteed cut in Sept, Nov, Dec. Is a hot inflation print gonna change that? Is the market gonna go back to pricing in recession risk if the inflation print comes in hot, because the Fed might not be able to cut as many as they would like?
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