The article argues that the Fed's inaction on rate hikes, despite equity mania and persistently above-target inflation, will be counteracted by rising long-term bond yields, which will tighten financial conditions and potentially trigger a market correction. This means the bond market, not the Fed, will impose discipline, creating headwinds for risk assets.
•The Fed is in 'wait and see' mode while equity markets exhibit 'mania' and inflation remains above target.
•Long-term bond yields are already rising to cool the economy, effectively doing the Fed's job for them.
•Central bankers' default response to heightened uncertainty is to gather more evidence rather than make decisive policy choices.