For the past few weeks, I have been talking about the potential for the Fed to begin being able to transition from a “rush” to more of a “grind” in terms of their tightening cycle. And while that theme has been delayed by the core CPI print last week, I think it is still relevant in terms of thinking about Fed policy going into 2023. I thought there was a chance that we could begin thinking about dropdowns in the size of Fed rate hikes starting at the September meeting, and I was wrong about that, but to me the theme is still that we are in a transition from “pace” to “destination” being the marginal variable of importance. I was wrong about the dropdown commencing but I continue to think we are at a transition point for Fed policy where it is more about the terminal level of the funds rate than the pace of the rate hikes.
With that background in mind, I want to break down my September FOMC preview into three sections:
Where are we?
Where are we (really the Fed) going?
1+2 = what September FOMC will sound like from dots to presser.