A subtle shift in Fed reaction function? ...when bond less CPI "reactive" and equities see extreme negative positioning

There was a lot of macro chatter, commentary and analysis over the weekend following the extreme market moves post the "very hot" Sept CPI. But there were a few subtle changes that caught many people's attention:

Post-CPI and even pre-CPI (days into), Fed officials uniformly spoke about staying the course even as CPI seems hotter. This is a more balanced view and reflects the growing risks of financial liquidity issues.Several economists, citing the recent BLS study, noted that Shelter/OER/rent, the primary source of CPI upside, lags market-based measures and the "gap" is closing. Will this lead to looking at CPI core ex-shelter? Maybe.Fixed income investors noted a divergence in the Fed funds futures curve, post-Sept CPI. The front-end (near term expiries) only moved up modestly (+10bp) despite a "super hot" CPI while the later-2023 maturities rose. This is a "higher for longer" but several macro investors noted this rise in out periods is also just "risk premia" and conditional on developments. Meaning, the anchoring on the front-end was the signal.In short, the subtle shift in a "hot CPI" is not necessarily resulting in a Fed banging on another panic rate hike.Friday's sell-off in equities was fueled by massive put buying and short-selling. Essentially a reload after th...
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