An Open Letter to Jerome Powell

Powell said at the May FOMC that 75 bp hikes had not been considered, and now they are built into market expectations for tomorrow's meeting. Yet the information about inflation and inflation expectations has improved, on balance, compared to that available to the Committee in May. CPI year over year is only 4 bp higher, while it is 60 bp lower on a 3-month annualized basis. Core CPI year over year is 45 bp lower.  5-year TIPS breakeven spreads are 17 bp lower. And the University of Michigan's survey of 1-year expectations is unchanged. Turbulent markets are likely concerned that the Fed will accelerate its normalization regime into a damaging tightening regime, and for no good reason at all.