Fed: Do you believe us now?

Mid-week market update: Yesterday's hot CPI report finally convinced the market that the Fed is serious. For weeks one Fed official after another gave the same message: We will raise rates to about 4% and hold them there while we evaluate the inflation picture. We don't want a repeat of the 1970s when the Fed prematurely eased while inflation pressures were still strong.

Former Fed Vice Chair Richard Clarida said in a CNBC interview,  "I think they’re going to 4% hell or high water, if I had to put it into two boxes. They are data-dependent, but that’s why they’re going to 4%. Inflation is way too high."

The market is now discounting a 75 bps move next week with about a 25% chance of a 100 bps. The terminal rate is rose to 400-425 bps from 375-400 bps before the CPI report.

The full post can be found here.