The Federal Reserve delivered its expected rate increase and then basically told markets they are on their own when it comes to determining what’s next. Stock bulls took that as a reason to celebrate.
The Federal Reserve delivered its expected rate increase and then basically told markets they are on their own when it comes to determining what’s next. Stock bulls took that as a reason to celebrate.
Chair Jerome Powell said the central bank won’t offer explicit guidance on the size of the next rate move after boosting its target by three-quarters of a percentage point and suggesting another “unusually large” increase might be warranted at September’s meeting. He then quickly added that thereafter “it will likely become appropriate to slow the pace of increases.”
The move away from clear signals on the size of coming rate increases emboldened equity bulls to speculate that the Fed could soon pivot away from its aggressively restrictive policy. Treasuries also rallied, sending the two-year yield below 3 per cent in a sign that rates markets expect the central bank could reverse some of its tightening in the next year.
While risk assets rallied, commentary from Wall Street brought a more diverse set of views on whether the immediate reaction in financial markets is warranted. Here’s what they were saying:“First and foremost, the market got very much what they expected in terms of the rate hike,” he said. “No surprises, right? That’s a sigh of relief. The second is, Jerome Powell and the FOMC are really walking away from forward guidance.
“Market rallying every time Powell says they will continue to raise rates. Counterintuitive, perhaps, but reflects the obvious: The Fed will cause a hard landing.”“Seventy-five basis points is a big increase especially coming off from the prior 75 basis point,” he said. “Chair Powell has been very adamant that he is open to front-loading the hikes. So is that done now? The bond market is a little bit more worried about a hard landing still.
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