Last week's news brought a mix of I-told-you-sos, cringes. and even some sympathy for Mr. Bernanke and pals. I reported on much of this in my posts on the April CPI release -- here and here -- but the reaction continued on through the week. The I-told-you-sos came from Bizzy Blog (honoring the presumed prescient Don Luskin) and from Barry Ritholtz (who has told us so before), seconded by Mr. Naybob. Cringes can be found at The Capital Spectator, at The Skeptical Speculator, from the other side of the ocean via (a skeptical) David K. Smith, and at Asymmetircal Information, sharing the misery with Jim Hamilton. Also at the Capital Spectator, the sympathy. CS is all alone on that one.
In any event, the market has apparently decided that its time to think twice about the rate-hike pause scenario. Once again, the probabilities of a pause in June versus at least one more rate hike switched places, according to the Carlson-Craig-Melick estimates from options on federal funds futures:
August is still a work in progress, but it is clear that sentiments are leaning hawkish:
The data, if it will do you any good:
Download implied_pdfs_051906.ppt