Rates as of 0500 GMT

Market Recap

Well, I feel vindicated! Several Fed officials echoed my views yesterday, largely reversing market sentiment.

First off, former Fed Vice Chair Bill Dudley wrote an opinion piece for Bloomberg News, Wishful Thinking Wont Help the Fed Beat Inflation. Investors have lately become strangely optimistic that the Federal Reserve wont have to tighten monetary policy much further, bidding up stocks and bonds amid hopes that the Federal Reserve will soon get inflation under control, he wrote. This wishful thinking is both unfounded and counterproductive. Isnt that pretty much what I said yesterday? Wishful thinking in markets only makes the job harder, by loosening financial conditions and requiring more monetary tightening to compensate. Loyal readers may remember that in last Fridays daily I included this graph making exactly that point.

Shortly afterward, San Francisco Fed President Daly nonvoter reiterated that the Fed is nowhere near achieving price stability and needs to keep committed until we actually see it in the data.

Other members of the ratesetting Federal Open Market Committee FOMC echoed these views. Chicago Fed President Evans NV largely reiterated comments by Fed Chair Powell during the July FOMC press conference. He said he thought the Fed might hike 50 bps or 75 bps at the September meeting and thought they might be able to meet the end2023 target range for fed funds that was set out in the June Summary of Economic…