Inflation Surprises Delay The Decision

Inflation Surprises Delay The Decision

In the short term, it's nice to see that today's massively higher PPI reading didn't do more than it did to crush the bond market's spirit.  This isn't the craziest turn of events given that we already had a bit of spirit crushing after Tuesday's CPI, but that several Fed speakers said they're not reading too much into one month of data that breaks from the recent disinflationary trend.  In the slightly bigger picture, however, there's an opportunity cost.  Sure, things may not be unimaginably worse than they were last week, but where would we be if inflation came in slightly below forecast?  Very likely, that would have resulted in a much more constructive narrative heading into March where a decent result in NFP and CPI in 3 weeks would pave the way for the Fed to give the first signal that a rate cut would be on the table in subsequent meetings.  As it stands, even if the data released in March is bond-friendly, it will have to be taken with a grain of salt until April.  More waiting as opposed to less.