Cooling "soft data" argues Fed playbook soon change to more predictable. In 1982, took only 4 mos to erase entire Volcker "bear market"

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Fed speak post-June CPI shows the Fed playbook seems to be changing

Most investors, based upon my conversations, remain skeptical that markets can find any footing, particularly in the face of continuing bad CPI reports. But I think investors are overlooking that Fed reaction to "hot" inflation prints is actually changing.

Last week, after the horrific June CPI report, several Fed members spoke and pushed back against the market's knee-jerk reaction to expect 100bp hike. SF Fed Reserve Bank Mary Daly and other Fed members made similar comments:

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This is a reminder the Fed isn't only reading CPI reports. They are incorporating many leading contemporaneous and leading measures into their thinking about inflation trends. A simple graphic below shows there are many leading indicators that can inform the Fed:

"soft surveys" are important such as U Mich consumer expectationsthe high reading in mid-June triggered the Fed to move towards a 75bp hikethe Fed, like economists, all know many leading indicators might soften on inflationbut there are serious lags before this shows up in weaker CPIthe current issue is the high-side reading on "rent" and "owner's equi...

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