Is the Fed behind the curve?

 An interesting chart from TopDownCharts

Based only on this chart we could make an assertion that the Fed has fallen behind the curve.  Against that there is the argument that other factors are important too, and not to mention the point that the Fed basically decided to position itself behind the curve to try and prevent the mistake of tightening too soon. With the composite measure of inflation expectations at 40-year highs it’s fair to suggest that the Fed may have some catching up to do as it kicks off the transition away from easing.

What the chart shows is that inflation expectations (their proprietary index, I assume) is now much higher than where the Fed Funds rate should be.  Note that it shows the change in Fed Funds, not the level.  Note also that the inflation expectations index is higher than it's been in nearly 40 years, as indeed inflation itself is.  In the past, the Fed has often quickly unwound tightening when there is a market tantrum.  But what this chart means is that may not happen this time.  Bad news for equities.  Luckily, fiscal policy under the Biden administration is still very expansive, so the impact on the economy may not be so severe.  I've been taking money off the table for a while and now sit on just 45% equities in my notional portfolio.