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Today at 1:30 pm EST Fed Chair Powell will give a speech at the Brookings Institute on “The economic outlook, inflation, and the labor market”. Let me save you some time and tell you in advance what he will say:

First, he will say that while it may be appropriate to decrease the pace of rate increases starting in December i.e. 50 instead of 75 the terminal rate may be higher than forecasted in September. He will reiterate that the battle against inflation is “far from over”.

He will acknowledge that the October CPI Report was a good one but say that it’s just one report and the Fed needs to see more before declaring victory over inflation.

The majority of his speech is likely to be a technical discussion of labor market dynamics and their impact on inflation which only economists and wonks will care about.

Since the market has heard it all before there is likely to be little reaction. However, there is a small chance that Powell will be harsher than expected in which case we could see a selloff which is the rationale for my “Powell Smackdown” trade.

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