This week, Federal Reserve Chairman Jerome Powell made comments that seemed to further embarrass the market, which had already been pricing in a shift to monetary easing, sparking confusion among market participants. It’s going up in the club.
On the 15th, New York Fed President Williams said it was too early to discuss a March rate cut. He tried to contain the market’s euphoria, but was unable to reverse this week’s gains.
NY Fed President William Williams says it’s ‘too early to talk about March interest rate cuts’ (1)
Sonal Desai, chief investment officer for fixed income at Franklin Templeton, said on Bloomberg Television that he was “perplexed” by Powell’s comments at the press conference. He said: “I have no idea why the chairman decided it was necessary to encourage a move towards lower interest rates, given his previous acknowledgment of the role of markets in providing an appropriate monetary tightening environment as interest rates rise.” Even more so.”
“If the Federal Reserve wants to show some level of caution, I think they will try to dampen some of the market excitement over the next few weeks.”
Goldman Sachs Group’s Financial Conditions Index (FCI) fell this week, leaving it more than a point below where it was in late October, when Treasury yields were soaring.
Even after Williams’ remarks, swap contracts linked to the Federal Open Market Committee (FOMC) meeting still factor in a rate cut of approximately 150 basis points (bp, 1bp = 0.01%) next year, with a March rate cut expected. The predicted probability of starting is about 80%.
Chris Iggo, chief investment officer of Core Investments at AXA Investment Managers, said in a note on the 15th, prior to Williams’ remarks, “As for the timing of the rate cut, there has been no pushback from the U.S. Federal Reserve.” “There is no hiding anymore as to the next phase of the cycle, which will be characterized by the end of rate hikes and monetary easing, although this is somewhat likely.” He believes that “shifting market momentum will be difficult.”
news-rsf-original-reference paywall">Original title:Investors Baffled After Powell Turbocharges Slide in US Rates(excerpt)
2023-12-15 19:46:00
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