Good Tuesday AM,

Markets in a holding pattern as expected heading into tomorrow’s Fed meeting.

We did have some inflation data today with the CPI report which was on the weaker side but not weak enough for traders to get excited. Still not at the Fed’s goal of 2% but we are getting there. CPI month over month came in at 0.1 and the Core CPI came in at 0.3.

The Fed meeting starts today and ends tomorrow with the policy statement, dot plot of fed member expectations for the future of rates, and then of course, the Q&A with Fed Chairman Powell. I think markets are hoping for something that may not come. I do not see it likely Fed Chairman Powell will reverse his course of the last 20 months and now say the Fed will cut rates. I think he will be more hawkish than that. I do not expect him to raise rates again, but I do expect him to highlight the concerns and say that future rate hikes are still possible.

The likeliest outcome from this is bonds sell off a bit.

We do get the PPI reading tomorrow a.m. before the Fed announcement. I would not float going into the meeting. We have already seen close to 80bps in rate improvement and even if rates improve after the meeting, you can always float down.

My best regards, make today great!