Hawkish Federal Reserve Again Raises Rates 75bps as Expected, March 23 Terminal Rate Higher

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    Powell Speech:

    Inflation is much too high
    Business fixed investment looks to have declined in Q2
    Labor market is extremely tight
    Wage growth is elevated
    Price pressures are broad
    Although prices for some commodities have turned down, earlier surge has boosted prices and inflation pressure
    There is still additional upward pressure on inflation
    We’re highly attentive to inflation risks
    We are looking for compelling evidence of inflation coming down
    The pace of hikes will continue to depend on incoming data and evolving outlook
    Another unusually large increase could be appropriate but it’s dependent on data between now and then
    Inflation has surprised to the upside in the past year so we will need to be nimble



    We will make decisions meeting-by-meeting now
    We will ask if we’re seeing a slowdown in economic data that we think we need? We think we’re getting some evidence now
    We will be watching both core and headline inflation and what they say about the outlook
    We need to get policy to at least a moderately restrictive level
    We think it’s time to go to a meeting by meeting basis and not provide clear guidance
    We have to take estimates of where rates will be next year with a grain of salt
    3.00-3.50% is what the SEP says on a moderately restrictive stance at year end
    Latest inflation report was worse than expected
    By Sept, we’ll have more inflation data in hand
    Will ask ourselves ‘are we confident that inflation is on the way to 2%?’


    Fed’s Powell: Cannot Predict MonPol Rate Range For Next Year
    – To Offer Less `Clear Guidance’ On Rate Moves
    – Our Thinking Is That We Want To Get To Moderately Restrictive Level By End 2022, Meaning Means 3% – 3.5%


    JP Morgan “expect another outsized #Fed hike in September, but post that we would look for the Fed not to surprise the markets on the hawkish side again”

    Helmholtz Watson

    The Federal Reserve again raised rates by 75 bp at their September meeting. The market was pricing in 84.0% for 75 bps and 16.0% for 100 bps. It was a
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