What's Not Priced In EP18: The Fed is About to Be Blindsided

The US Fed held rates steady but flagged more tightening ahead. And markets finally caught on that the central bank is deadly serious about taming inflation. So are we entering a new era of 'higher for longer' interest rates? As Greg Canavan and I mentioned before, when consensus forms in markets, it pays to listen to your inner contrarian. Rising bond yields suggest investors are more confident inflation can return to target without a sharp slowdown. But how confident should investors really be? As Milton Friedman once said, it takes time for inflation to be cured and unpleasant side effects of the cure are unavoidable. What's not priced in? The extent of those side effects.