The Federal Reserve continued to press ahead yesterday with its public relations effort of talking up the possibility of a rate hike, perhaps as early as next month. The latest addition to the hawkish-chattering club is the Philly Fed’s Pat Harker, who advised on Monday that “I can easily see the possibility of two or three rate hikes over the remainder of the year.” The comment follows similar remarks from central bankers in recent days, including the New York Fed’s Bill Dudley, who said that “if I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation.”

The market reaction, however, is mixed. The 2-year yield—considered the most sensitive spot on the yield curve for rate expectations—is moving higher. This maturity ticked up to 0.91% yesterday (May 23), based on daily data via Treasury.gov. That’s the highest rate for the 2-year since mid-March. But the benchmark 10-year yield, which is more sensitive to inflation expectations, has a downside bias these days, settling at 1.84% yesterday—well below the peak for the last two months.

Speaking of inflation expectations, they’re trending lower again, by way of the implied forecasts via spreads in nominal less inflation-indexed Treasuries. The downside bias is especially conspicuous in the 10-year breakeven rate, which eased to 1.54% yesterday, the lowest since mid-March. Note, too, that the softer inflation estimate is accompanied by a stock market that’s drifting lower this month. That’s not terribly surprising at this late date. The tight correlation between the S&P 500 and the implied inflation forecast via 10-year yields endures. The fact that both are ticking down again suggests that the Fed chatter about squeezing monetary policy is casting a disinflationary effect across markets. That’s not exactly productive at a time when doubts persist about the near-term prospects for economic growth.