The Fed has a problem with saying one thing, while the markets want to hear another. “The bottom line is that the markets are not buying what the Fed is selling,” said Diane Swonk, chief economist at KPMG. “This increases the demand on the feds to go further and be more hawkish.” Stocks were lower on Thursday, and bond yields lagged as investors considered the hawkish tone of the Fed’s message that it would raise rates for a longer period of time. Markets slipped on Wednesday afternoon after the Federal Reserve released its policy statement and new interest rate and economic forecasts. The Fed raised interest rates by half a percentage point, and is now targeting a range between 4.25% and 4.5%, a 15-year high. The Fed has signaled that it will raise interest rates next year to a higher rate of 5% to 5.25%. “[Fed Chair Jerome] Powell didn’t get what he was after. “There’s a clear gap between what the financial markets want to believe and what he’s saying,” Swank said. “The talk was hawkish and the Q and A were very dovish,” she says. Swank said there is consensus among Fed officials to raise rates, and most officials predict rates will rise above 5 percent in 2023. But the markets don’t believe it. Re-strengthening. If they do, they should do more,” Swonk said. Fed funds futures on Thursday showed a high rate of next May at 4.89%, still below the Fed’s target. Peter Bukvar, chief investment officer at Bleakley Financial Group, said in a chart showing the unnamed targets of various Fed officials. “Points The plot was leading people higher, and the market didn’t seem to take the bait.” The annual yield, which largely tracks Fed policy, fell after the Fed meeting. It was at 4.22% on Thursday. “The market is basically saying that 4.75% to 5% is where the Fed will end up,” Boukvar said. That’s another. 50 basis points.” While the market doesn’t believe the Fed will go as high as it wants, Bukvar said investors may be heeding a warning that rates will be higher for a longer period of time. This morning’s action, Powell is succeeding in convincing people that rates will stay. It’s higher for longer,” Boukvar said. “Holding prices longer is a form of tightening. “Between Hope and Fear” The improvement in inflation seems to be one area where markets and the Fed don’t see eye to eye. Strategists were surprised the Fed didn’t signal improved inflation until after Powell spoke. But they downplayed every positive move. In a briefing after the meeting, Powell acknowledged that inflation has slowed, but added that the Fed needs to see more concrete evidence that inflation is slowing. November’s consumer price index rose 7.1% annually, down from 7.7% in October and Some strategists say the Fed’s decision to keep hiking rates could do more damage to the economy. In the bond market, strategists say recession fears are clearly weighing on interest rates. Michael Aaron, chief investment strategist at State Street Global Advisors, said: “Investors are hopeful and “I think they’re going to continue to hold somewhere between fear,” he said. Jeffrey Gundlach, CEO of Dublin Capital, said after the Fed meeting on Wednesday that the central bank should stop raising rates because the economy is already weakening. “I think there is some improvement in inflation,” Gundlach said on CNBC’s “Closing Bell: Overtime.” “No one is talking about all these runaway price increases. I think inflation will come down faster than most economists think as the economy weakens.” Stocks were higher ahead of the Fed’s 2pm ET statement on Wednesday, and sold off before recovering from the day’s worst levels. The 10-year Treasury yield was at an all-time high after the Fed’s statement and declined to enter Powell’s briefing and into the rest of the day. Products move in opposite price. The 10-year yield was at 3.48% on Thursday. One problem with the Fed is its terminal rate forecast for 2023 at 5.1%, a full percentage point lower than the 2024 rate forecast. According to Bukvar, the futures market has predicted a rate of less than 4 percent for April 2024 and a full rate reduction by the end of 2023. Mark Cabana, head of U.S. price strategy at Bank of America, predicted what he had predicted. The Fed’s forecast for Wednesday. “The market is basically thinking you can say whatever you want for longer. We don’t believe it. We believe six to nine months after you stop hiking, you start cutting,” he said ahead of the meeting. . “As long as the Fed keeps those cuts in their forecast… higher timing is not credible in the market’s mind.” Citigroup economists also noted how the Fed failed to make a strong voice on policy Wednesday. He titled his memo at the Fed meeting, “Hawkish Message Fails to Resonate with Markets.” In it, he wrote, “Powell and the FOMC were hawkish because they were reasonably predictable.” The National Alliance’s Andy Brenner thinks the federation is done with the reasonable increase. “While we would like to say yes, the Fed’s statement was too aggressive to make a commitment at this time.” He added that the dollar’s decline on Wednesday was like the end of the Fed. “We’ve seen this before,” Brenner wrote. “Powell tries to make everyone believe he’s a hawk…but once he’s off script, all the world can see is a dove in wolf’s clothing.”
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