Watch Live: Will Powell Crush The Market’s Euphoric FOMC Take
Well, The Fed delivered the 75bps rate-hike that the market had fully expected, and offered a significant hint that they will slow the pace of rate-hikes due to the “lagged” effect of monetary tightening.
The terminal rate expectations have dropped (dovishly) but rate-cut expectations have also dropped (hawkishly) – market is pricing higher rates for longer… and not a quick pivot.
The question now is whether Powell will attempt to calm the market’s exuberance that this is not a ‘pause’ or a ‘pivot’ but a ‘slow-down’.
Amid mounting political pressure, Powell’s best bet is to keep it brief to avoid accidentally saying something that sparks the worst case scenario extreme ramp higher in stocks and easing of financial conditions that is anything but what The Fed wants right now given the apparent strength in the labor market and no signs of easing in core inflation indicators.
However, the bottom line is that while Powell may concede ground on a slower pace of tightening, he is unlikely to budge on the level of the terminal rate he sees.
With inflation many miles away from its 2% goal and the labor markets still tight, the Fed is unlikely to signal that it may be done early next year or even later for that matter.
The message that Powell is likely to drum home is that the economy is losing momentum, but “we will do what it takes” to get inflation down and toward the Fed’s target.
As Peter Tchir noted immediately after the statement:
Cumulative and Lag – they inserted language that they will take that into consideration – keeping my bet that we come out of this with smaller / fewer / more spaced apart rate hikes priced in – given that insertion and no dots to lean on, seems good bet that Powell will be equivocal, which is enough…but will find out when presser starts
So, get ready for some volatility…
Watch live here (due to start at 1430ET):
Tyler Durden
Wed, 11/02/2022 – 14:25
Watch Live: Will Powell Crush The Market’s Euphoric FOMC Take
Well, The Fed delivered the 75bps rate-hike that the market had fully expected, and offered a significant hint that they will slow the pace of rate-hikes due to the “lagged” effect of monetary tightening.
The terminal rate expectations have dropped (dovishly) but rate-cut expectations have also dropped (hawkishly) – market is pricing higher rates for longer… and not a quick pivot.
The question now is whether Powell will attempt to calm the market’s exuberance that this is not a ‘pause’ or a ‘pivot’ but a ‘slow-down’.
Amid mounting political pressure, Powell’s best bet is to keep it brief to avoid accidentally saying something that sparks the worst case scenario extreme ramp higher in stocks and easing of financial conditions that is anything but what The Fed wants right now given the apparent strength in the labor market and no signs of easing in core inflation indicators.
However, the bottom line is that while Powell may concede ground on a slower pace of tightening, he is unlikely to budge on the level of the terminal rate he sees.
With inflation many miles away from its 2% goal and the labor markets still tight, the Fed is unlikely to signal that it may be done early next year or even later for that matter.
The message that Powell is likely to drum home is that the economy is losing momentum, but “we will do what it takes” to get inflation down and toward the Fed’s target.
As Peter Tchir noted immediately after the statement:
Cumulative and Lag – they inserted language that they will take that into consideration – keeping my bet that we come out of this with smaller / fewer / more spaced apart rate hikes priced in – given that insertion and no dots to lean on, seems good bet that Powell will be equivocal, which is enough…but will find out when presser starts
So, get ready for some volatility…
Watch live here (due to start at 1430ET):
Tyler Durden
Wed, 11/02/2022 – 14:25
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