The US Federal Reserve (Fed) raised interest rates by another 3 yards (75 basis points) on Wednesday (27th), and did not rule out another sharp rise in interest rates, but investors smelled the possibility of slowing down the pace of interest rate hikes from Chairman Powell’s remarks sex, which motivated the stock market to soar. In response, former Fed officials and some observers said that investors misjudged Powell’s speech and underestimated his determination to fight inflation, the Fed may still raise interest rates to levels higher than market expectations.
In his post-meeting press conference, Powell reiterated that the June interest rate dot plot is the “best” guide for policy tightening, which means the federal funds rate will rise 4 yards by the end of the year, to regarding 3.25-3.50%, and increase by 2 more next year. code.
That view is a bit higher than what the market is pricing in, said Bill Dudley, president of the Federal Reserve Bank of New York. “Three or four times in Powell’s talk, he mentioned the June economic forecast, which means the Fed thinks it should do more than what the market is expecting today. ”
With the economic outlook full of uncertainty, Powell said following the meeting that decisions will be made on a meeting-by-meeting basis and will depend on economic data during each meeting, and will no longer provide “clear guidance” on interest rate movements. He also admitted that from the data observed by the Fed, there is no shortage of interest rate hikes that may slow down at some point in the future.
U.S. stocks rose sharply during the press conference until the close. Du Lei believed that this was just a “sigh of relief” for the market following the meeting. But he warned that the market’s upside has been “very limited” and that the Fed needs to tighten financial conditions to achieve its twin goals of eliminating slack in the labor market and suppressing inflation.
Some observers also pointed out that the Fed’s top priority is still to curb inflation, even if it costs the labor market.
“The market goes up first and then asks questions,” said Neil Dutta, director of U.S. economic research at Renaissance Macro Research. “I don’t think inflation will drop enough to cut interest rates. Powell has repeatedly said the economy needs to cool to get there, and that alone A mild recession may not hit the mark, and the Fed needs to do more.”
Piper Sandler’s Roberto Perli and Benson Durham said the stock market rally and short-term interest rates rising more than long-term interest rates following the decision meeting were typical of the market’s reaction to a higher rate cut or an earlier rate cut, but from Ball’s remarks Judging by it, “it’s not at all like what a Fed chairman would say if his attitude turned pigeons.”
Durey believes that the final high of the federal funds rate is likely to be closer to 4%. NatWest Markets also said that it can be inferred from the content of the press conference that Fed members may have a higher view of the median federal funds rate this year.
