The quarterly SLOOS results are out later today ahead of “empty” data week. Powell will take stage on Wednesday and Thursday. Will he backpaddle if the melt up continues?
The Fed introduced a new feedback loop, which is likely to limit the scope of this bear market rally. Remember that Q4 data usually looks really bad in an inflationary environment, while Q1 is the quarter of “inflation math”.
When Powell allowed market based conditions to dictate the Fed Funds path, he indirectly also introduced a hawkish reaction function, if risk and term premias abate in coming weeks.