- Inflation would need to surprise on the low side for it not to be 50 bps in September
- But investors should not think that 50 bps rate hikes are the new default
- Market expectation of the terminal rate shot up quite dramatically last week
- One should be careful about the speed, not get carried away
Well, if they’re concerned about markets getting carried away then they should have done a better job in terms of communicating their policy outlook from the get-go. Their first mistake was sticking with the ‘transitory’ narrative for too long. Things have just been snowballing from there ever since.