The most important thing I learned this week (besides never grab hold of a skillet on a 500 degree grill) is that the people arguing that Fed will lose their nerve early and Fed Funds wont get over 3% are going to be wrong. I say that even in the context of observing commodity disinflation and continued leading indicator weakness that suggest we are sliding toward recession and curve inversion. Chairman Powell, Cleveland Fed's Mester as well as the Bank of International Settlements, which issued their annual economic report this week, are all singing from the same hymnal.

The Fed will successfully destroy demand. Gasoline prices may not come down meaningfully anytime soon due to the structural supply issues we discussed last week. Job openings may well stay elevated for months to come and consumer spending will continue to benefit from the dwindling stockpile of savings from fiscal stimulus and the vestiges of QE. But in one very important sector of the economy, the Fed's efforts to cool demand are already playing out. That sector is housing (OER/Shelter) which represents roughly 40% of the data that goes into CPI. To state the obvious, interest rates matter to housing and a doubling of long-term interest rates matters a lot.

The Fed will successfully destroy demand. Gasoline prices may not come down meaningfully anytime soon due to the structural supply issues we discussed last week. Job openings may well stay elevated for months to come and consumer spending will continue to benefit from the dwindling stockpile of savings from fiscal stimulus and the vestiges of QE. But in one very important sector of the economy, the Fed's efforts to cool demand are already playing out. That sector is housing (OER/Shelter) which represents roughly 40% of the data that goes into CPI. To state the obvious, interest rates matter to housing and a doubling of long-term interest rates matters a lot.