Ok, now the Fed may have some concerns. The PPI came in much hotter than expected, and while they may want to see some price inflation this may be a worry. Of course, one number does not a trend make, so we will have to another month or two to really start thinking about it.
There is a strong relationship between a strong dollar and higher rates. Makes sense, really. Good growth strengthens the currency yet with a low fed funds the yield curve expands, forcing short term rates to rise soon. If the growth is inflationary rather than driven by productivity then the Fed must act to remove accomodation.
Lots to think about here, we'll see how the market responds. If these bond auctions are not likely to go well there will be more pressure on rates.
Tag >> PPI
