Don’t interpret what Wozh just said optimistically as a rate-cut tailwind.
He clearly stated that the 2% inflation target won’t change, but the current data is not yet enough to prove that inflation is quickly returning to 2%. This is crucial.
What the market wants most to trade right now is rate cuts, but what the Fed truly cares about is inflation.
If future PCE and CPI continue to improve, expectations for easing will naturally heat up;
but if inflation keeps flaring up, rate-cut expectations will still be repriced.
So at this stage, I actually think we should stay a bit cautious.
The market can trade rate-cut expectations early, but before liquidity truly becomes loose, expectations are ultimately just expectations.
The hotter the market gets lately, the more you can’t only look at prices—the macro storyline hasn’t really run its course yet.