Yeah, the mixed messaging is an interesting approach. The Fed is seemingly unconcerned about financial market volatility!
Summary via RBC (this in very brief):
- The policy statement struck a clearly dovish tone with the committee saying it will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” That seemed to flag a slower pace of tightening in December (as suggested in the September dot plot)
- Chair Powell would only say that shift “may come as soon as the next meeting or the one after that.” He also emphasized that there is “still a ways to go” on rates, and that it is “very premature” to be thinking about pausing rate hikes. Adding to the hawkish tone of the press conference, Powell said the the terminal policy rate could be higher than the committee expected in September when the dot plot showed fed funds rising to 4.50-4.75% next year.
And, on what's to come:
- We continue to see upside risk to our forecast for a 50 bp hike in December and 25 bp increase in February leading to a terminal fed funds rate of 4.50-4.75%.
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Wild major FX swings on the mixed messages, EUR/USD for example:
