Long-term interest rates have been rising since mid-March and are at their highest level in six months. Expected inflation, as reflected by the difference between the yields on nominal and inflation-indexed bonds, rose in response to Tuesday's rate cut to the highest level in a year.
Granted, at 2.2 percent, expected inflation is still low. But it's moved up from 1.4 percent in January.
Clearly the market senses the Fed has strayed far afield from its normal metier and is now intent on helping the Ciscos and Intels of the world work down their inventories.
What sort of yardstick will the Fed use to know when it's done enough? In mentioning inflation and claiming it's contained, the Fed called attention to the elephant in the room. The beast of burden is not going to leave because the Fed tells it to.
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