By Michael Every of Rabobank

Inflation Dragon? Blame Canada!

Imagine you are Jay Powell. You come into the Fed being called the new 'Tall Paul'. You then preside over the worst inflation since Tall Paul. So, you decide you have to do what Tall Paul did after all. All the other central banks agree: off you all go into battle against the Inflation Dragon and its evil army - except the BOJ, which nailed itself to the ground years ago.

Markets throw all manner of things, and expletives, at the charge led by the Fed's 75bp strides: but as the inflation-fighters are united, they have strength in numbers.

Except almost immediately the RBA decides that while it is absolutely alongside the Fed, it suddenly needs to do up its shoelaces and then go at a 25bp pace. While down on one knee pretending to be doing so, it sneaks out a property magazine hidden inside its shirt and starts drooling over it while shouting, "Right behind you, mate!"

Markets take this as a Fed pivot ahead. They price for an easing cycle, effectively strengthening the inflation foes on the other side via lower borrowing costs, higher commodity costs, and helping to arm the Inflation Dragon's army by buying them 'all the things'.