After traders get past this tricky Fed meeting, a confusing second half awaits

After traders get past this tricky Fed meeting, a confusing second half awaits

This will be a for traders, but it won't be much easier even after the gathering. Even if the Fed adopts a best-case, stay-the-course-on-tapering-and-rate-hikes scenario, the market has a big problem: Traders don't know where we are in the economic cycle. First we need to get past the Fed meeting Inflation hawks are on the rampage. Inflation is running above the 2% target, which is what the Fed wants. Will the recent stronger-than-expected inflation reports force the Fed to hike rates sooner than expected? In March, all 18 policymakers expected no rate hikes this year; four expected hikes in 2022, and seven said rate hikes would not come until 2023. Inflation hardliners are insisting that should change, with more anticipating rate hikes sooner. But many on the Street still don't believe it. "Some of this hawkish expectation is way overblown," said Michael Arone, State Street's chief investment strategist for the U.S. SPDR business. "Powell is going to say the labor market has 7.5 million jobs to go before it gets back to where it was." Many other strategists agree, pointing out that the key to understanding Fed Chairman Jerome Powell's mindset is to understand his fixation on improving the labor