The terminal Fed Funds rate is now perceived as about 5.00% down from 5.50%-to-5.75%. The market does not believe in higher-for-longer.

(Click on image to enlarge)

Question of the Day

When has the Fed gotten much of anything correct? 

The Fed strived for years to produce inflation with absurd QE policies. When the Fed finally got inflation, every Fed member plus Treasury Secretary Janet Yellen said inflation was transitory.

The market never believed in the Fed's "higher for longer" message until just before banks started blowing up globally. Then things stunningly reversed as the lead chart shows.

Bond market volatility has been the most on record.

ECB Hikes Interest Rate by 0.50 Percent: "Inflation is Expected to Remain too High too Long"

On March 16, ECB Hikes Interest Rate by 0.50 Percent: "Inflation is Expected to Remain too High too Long"

I have no idea if the Fed still believes that or not. No one else does either.

But why does it matter? The Fed has no idea what it's doing, it's dot plot track record provides endless amusement. 

Besides, even if the Fed does believe that, it is highly susceptible of doing something else anyway.

By the way, the Fed wanted inflation and then some to make up for lack of past inflation. 

Will we see an apology or an appropriate policy for having too much inflation?

Bond Market Volatility Rises the Most Since the Great Recession

On March 15, I noted Bond Market Volatility Rises the Most Since the Great Recession

Then suddenly we have gone from a 50 basis point hike to none at all for the March 22 FOMC. 

Never before have we seen such a amazing swings this close to an FOMC announcement.

The Fed finally convinced everyone that it meant higher for longer, then a few days later people are discussing rate cuts. What a hoot.

Expect some hedge funds to blow up over this bond market volatility.

That didn't take long.

High Profile Hedge Fund Blows Up as Bond Market Losses Hit 25 Percent

On March 18, I noted High Profile Hedge Fund Blows Up as Bond Market Losses Hit 25 Percent

And as I type, a quick refresh of CME FedWatch shows an 88.6 percent chance of a 25 basis point hike on Wednesday. 

Expect BS

Expect the usual BS tomorrow about the Fed being data dependent. 

If they claim that again, you know, I know, and even they know it's a lie. Right now the Fed will do whatever it can, not to reduce inflation, but to reduce bond market volatility. 

Dot Plot or Not?

Will the Fed continue its amusing practice of predicting what it will do when it clearly has no idea?

The Fed ought to stop, because forward its guidance has been either horrific or honored with horrific results.

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