Here's what's on Wall Street's mind right now: Inflation is finally happening, and the Fed will end up being behind the curve.
The events of the past week crystallized that above thought in the mind of economists and investors.
To step back, there were two big moments this week.
1) There was the jump in Core CPI that was the biggest since 2009.
2) And then there was the Janet Yellen press conference, in which she said that CPI jump could be just "noise" and that the recent drop in the unemployment rate was not actually reflective of the true state of the labor market (which she regards as considerably weaker due to measures of worker discouragement).
In other words, despite data showing that the Fed is getting close to hitting its economic goals, Yellen doesn't believe the numbers.
But Wall Street does believe the numbers.
Hence the view that the Fed will be behind the curve.
Here's Deutsche Bank, on why it's highly skeptical that the recent data is "noise." Basically the numbers we've gotten on both the inflation and unemployment side are VERY rare individually, and it's particularly rare that they would happen together.
Read full article at: http://www.businessinsider.com/inflation-wall-street-vs-the-fed-2014-6#ixzz35Hd1PgLL