Let's talk about the Federal Reserve's minutes.
Overall, the Open Markets Committee noted that there were still downward risks to the economy and that the U.S. is still in recovery mode as we start to adjust to life post-pandemic.
"When the slowing of the $120 billion in monthly bond purchases does happen, however, FOMC officials debated as to whether mortgage-backed securities should be slowed first, or sold in unison with Treasury bonds, with officials noting the need to be "well-positioned" to execute any tapering in response to "unexpected economic developments" which the Fed said would include faster-than anticipated progress towards its inflation and labor market goals," TheStreet's Martin Baccardax noted.
So, what about the hawkish shift we're seeing? Well, Real Money's Tom Graff has some thoughts. He broke them down in the video above and over on Real Money.
"There has been a narrative that's emerged since the June Federal Open Market Committee meeting that the Fed was spooked by the large May inflation prints into abandoning average inflation targeting. I think there's a much simpler explanation. For a while I've been saying that inflation was going to come in two phases. Phase one is what we're living through now, where a burst of post-pandemic demand is met with still mangled supply chains. That's the one the Fed always said would be transitory. Clearly from the minutes, most FOMC members still think that this kind of inflation is going to be transitory," wrote Graff.