In a surprising turn of events, this week's biggest market mover for interest rates was a policy announcement by the Bank of Canada (BOC). The event was credited for prompting a re-think of the US Federal Reserve's rate outlook. Specifically, the BOC hiked rates despite about half the market believing it would hold steady.  While the odds that the Fed holds steady at next Wednesday's announcement are quite a bit better, the argument this week was that central banks might err on the side of tough love as opposed trusting that inflation would subside.   If we look at year-over-year numbers, it seems clear that inflation is subsiding.  The following chart shows both monthly and annual versions of the Consumer Price Index (CPI) at the "core" level (which excludes more volatile food and energy prices).  Core CPI is the most relevant inflation data as far as rates are concerned.  The next release is next Tuesday, one day before the Fed announces whether or not it is hiking rates again. If we zoom in on the monthly number only, we see a different theme.  Inflation is still well above target levels and still trying to make up its mind on the direction of the next move. This inflation dynamic is responsible for the division of opinion on the Fed's next move.  Actually, it would be better to think of the uncertainty in terms of the longer-term Fed Funds Rate path.  Indeed, the Fed is unlikely to hike next week (unless CPI is far above expectations).  Traders have been more interested in adjusting their expectations for where the Fed will be by the end of the year.  Less than a month ago, futures markets were betting on a full point of rate cuts by December.  As of Friday, the same metrics suggest the Fed might not be cutting rates at all in 2023.