The Fed May Have to Hike Unless Stocks Drop One force can ease the policy tension facing the new Federal Reserve chairman appointed by President Trump, who has called for rate cuts: a modest stock-market decline could reduce the need for rate hikes. It may also help alleviate inflation, a top election issue as the midterms approach. My graphic highlights federal funds futures in one-year (FF13-FF1) priced for about 40 bps of rate hikes, the most on the way down since 4Q21. It's the consistency of stock-market declines shifting the Fed bias to easing from tightening that could play out in 2H. Surging deficit spending is inflationary, but the wealth effect of stock-market capitalization at about 2.1x public debt, the highest since 2007, may be the top force buttressing consumer prices. If stocks stay resilient, so may inflation, incentivizing Fed restraint. Full report on the Bloomberg here: https://blinks.bloomberg.com/news/stories/tk43t8kgzaix {BI COMD} #Federalreserve #stockmarket @Bloomberg(Mike McGlone)