Let's say the Fed does cut in September by 0.25%. And then these inflation metrics continue to accelerate. Would they flip flop and hike to recalibrate? I doubt that they'd pause in the face of rising/high inflation and I definitely doubt that they'd keep cutting rates. They'd be lambasted for making the same mistakes as Arthur Burnes and the Federal Reserve from the 1970s (the 2nd worst policy mistake in history after 1929/30). This is the current policy risk... They had a justification to cut in Q1, when disinflation was still firmly intact, and labor market conditions were still resilient. They stayed patient, to their credit. But now inflation is reaccelerating and the labor market is softening (though still resilient & dynamic). Based on the Fed's reaction function, they don't have conditions to cut right here, especially with how the data is evolving. The fact of the matter is that the Fed is still more focused on inflation than the labor market. So if the labor market is softening and inflation is reaccelerating, then their policy focus will only sharpen on fighting inflation even more... which means no cuts, at least for now. Embrace nuance.(Caleb Franzen)