Dudley Do-Wrong?

Former NY Fed President Bill Dudley continues to remind investors that the Fed will be unable to fight inflation with words alone. They are going to have to go through with a tightening cycle that is more aggressive than the market is pricing in order to be successful at preventing inflation expectations from becoming unanchored. His view is that inflation fears are unlikely to truly come out of market expectations with policy that continues to embrace negative real yields. Instead, he sees the federal funds rate peaking in the 3-4% range to battle inflation that is stickier in the 2.5-3% range. Markets are not pricing in this need to more aggressively tighten financial conditions. Buyer beware.

10year real rates - still massively negative. The Fed put is significantly lower than here.

Source - Bloomberg Data