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Hmmmm... Here's a tough one. This interest rate debate is going to make markets choppy.

Janet Yellen mentioned that although inflation bumped up yesterday a little more than what was expected, she felt it would moderate from here. That makes some sense for a couple of reasons. First, it takes about 6 - 9 months for an interest rate move to fully works its way into the "system". Second, oil has come down considerably over the past few weeks, so growth on a m/m basis is likely to moderate. And third, the PPI is showing signs that inflation should come down a bit, as producer prices always lead the consumer prices.

Wait a second here. Hold on.

The last rate increase was back in July. That's about 7 months ago. When exactly does the Fed think the last increase will finally work its way in?

And then there's that "oil-has-come-down-considerably" thing. Regardless of what its done over the past few weeks, it's getting undone in short order the past few days.

And as for that last bit about producer prices showing signs of moderation as well, well... didn't the core rate move up 0.2%?

Not exactly an economy that is showing signs of price pressures easing. Think about that for a second. We've gone from 1% all the way up to 5.25% in about two years time. In that time, price growth has largely remained firm. If the theory of 6 - 9 months holds true, then all but the very last interest rate hikes have worked their way in already.

I don't think the Fed should get too comfortable with their current position.... especially if they want to sound tough over inflation.

Source: Should The Fed Raise Rates?