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The market and the Federal Reserve are telling different stories about inflation — and there’s good reason to think investors have it right

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Hawkish now, dovish later?

The Federal Reserve and financial markets are pulling in different directions. 

On the one hand, the Fed seems to have grown a bit more worried about the possibility of inflation. At last week’s meeting, Fed members moved forward their median estimate for the next interest rate hike and clearly noted potential risks for higher inflation.

Investors, on the other hand, think the Fed is likely being too hawkish. While financial conditions have tightened a bit after the meeting, it’s clear financial markets firmly believe that inflation will be transitory and not details ⇒

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