Fed's Disconnection Headache

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Powell saved the world, at least on Friday, but below point from Manoj Hemrajani makes a valid point worth considering.

 

"Powell isn't dovish, he's data dependent. Wages are going up and the Fed will hike twice this year. It’s just that the hikes aren't cast in stone and so no longer priced in. The real question is, how far will risk assets rally on a trade deal. Trade, and not the Fed, is the real problem which causes business investment to slide and PMIs to fall."

 

Below charts showing Average Hourly and the US 10-year yield as well as the Fed´s favourite inflation chart, the US 5-year breakeven line. Inflations is vanishing as there are too many youngsters not in the labour force.

It surely looks like a disconnection to us, so be sure to pick the relevant one.

Source: charts by Bloomberg