Traders Bet Warsh's Fed Will Hike Rates by December

• Inflation's permanence is a key debate, with acknowledged risks of energy/commodity price spillover into core inflation and expectations.
• The baseline forecast suggests inflation will ease once energy and commodity supplies stabilize, leading the Fed to likely remain on hold for the rest of the year.
• Bond markets are currently seeing attractive yields (e.g., 4.5% on 10-year, 5% on 30-year Treasuries) and strong appetite for investment-grade credit, despite rising costs.

Economists are debating the permanence of current inflation, with a baseline expectation that it will ease once energy and commodity supplies stabilize, leading the Fed to hold rates for the year. Despite risks of spillover, bond markets are finding longer-duration, higher-yield assets attractive, showing strong appetite for investment-grade credit.