How quickly things can change. It looks like a rate hike is becoming a very legitimate concern now. This is the dynamism of the financial markets at work. Tim Duy, who does excellent work on the Fed, says that a hike is in play for June:
Bottom Line: “Patient” is out. Tough to justify with unemployment at the top of the Fed’s central estimates of NAIRU. Pressure to begin hiking rates will intensify as unemployment heads lower. The inflation bar will fall, and Fed officials will increasingly look for reasons to hike rates rather than reasons to delay. They may not want to admit it, but I suspect one of those reasons will be fear of financial instability in the absence of tighter policy. June is in play.
Gosh, that seems too early to me. My guess is that the Fed will play it more cautiously than June. I’d still be shocked if we get a rate hike before Q3. But that doesn’t mean that the inflation trade isn’t in the forefront of people’s minds….