Neel and Michelle, please see the further tightening that has gone on

After thinking further about what Minneapolis Fed president Neel Kashkari said on Monday and what the hawkish Michelle Bowman said last week about both leaving open the possibility of more rate hikes, and ahead of Kashkari speaking again today and a slew of Fed members that do tomorrow, they are missing a very important thing about their analysis. I'll say for the 3rd time in the past week, the US Treasury market has already raised rates an additional 50 bps+ since the Fed's last interest rate increase in July. Since that July 26th meeting, the 10 yr yield is up 67 bps. The average 30 yr mortgage rate is up by 55 bps to 7.78%. The Bloomberg High Yield index yield to worst is higher by 55 bps since July 26th at 8.90%. The CCC component yield is higher by 70 bps to 13.57%. 

While I think how high they keep rates at around current levels is much important at this point than whether they raise rates again, those that are still open to more hikes need to take into account what the market has already done for them. 

I want to chime in for a minute on the whole debate on 'Excess Savings' and the differing studies on how much people have left from the Covid largesse relative to 2019. I want to emphasize that these are all nominal numbers you're seeing. On a REAL, inflation adjusted basis, the excess savings has already disappeared. Here's an example, using the $2,000 per person that was given out between Trump ($600) and Biden ($1,400) to joint filers that made under $150,000 in 2020 and 2021. Let's take that couple making $150k. After both federal and state tax, assume they are left with about $110,000. Assume they save 5% of that and thus spend $104,500 on ALL of their annual expenses. Well, the CPI index is up 18% since December 2020. So, the cost of living for this family (all else equal), is higher by $18,810, swamping the $8,000 this family got, assuming they have two kids. Yes, hopefully they also got higher wages too over the past few years but you get the point.