How Can One Quarter, ‘Disinflation’ and SVB Impact Fed Live? – IEX.nl

The Fed raises interest rates by one quarter to 4.75-5.00%, as the consensus expected. Below you will first see the most important paragraphs from the maybe something divinity press release and the markets reacted as follows:

• Shares are gaining some weight
• EUR/USD rises half a cent
• US two-year yields fall ten (!0 basis points, but the ten-year is flat!

During the first 20 minutes of the press conference, markets continued these movements steadily, but then leveled off. Perhaps

Then there was Chairman Jerome Powell’s press conference, the main conclusions:

• In the past two weeks, there was an unprecedented bank run, especially at Silicon Valley Bank (SVB). Situation now under control and this is an isolated case of one bank going out of control. We will find out how and what and all credits are guaranteed
• Economy is running half-baked, inflation is still much too high (but disinflation is just around the corner) and the labor market is still much too strong (although wage inflation is declining)
• It is unclear how many rate hikes are still to come this year, but don’t count on cuts. Oh, the Fed briefly considered not raising interest rates in response to the acute banking crisis.

Perhaps this was the trigger that stripped the markets of its biggest pigeon feathers:

Jerome Powell: If we need to raise rates higher than expected, we will pic.twitter.com/DW6Z4Ca0tp

— Bloomberg Markets (@markets) March 22, 2023

From the press, the quotes that matter. From the president’s general speech:

• 22 Mar – 19:31:17 [RTRS] – FED’S POWELL: ALL DEPOSITORS’ SAVINGS ARE SAFE
• 22 Mar – 19:31:37 [RTRS] – FED’S POWELL: OUR LENDING PROGRAMS ARE EFFECTIVELY MEETING BANKS NEEDS
• 22 Mar – 19:31:44 [RTRS] – FED’S POWELL: ALSO SHOWS AMPLE LIQUIDITY AVAILABLE
• 22 Mar – 19:32:12 [RTRS] – FED’S POWELL: INFLATION REMAINS TOO HIGH
• 22 Mar – 19:32:18 [RTRS] – FED’S POWELL: LABOR MARKET STILL TOO TIGHT
• 22 Mar – 19:34:07 [RTRS] – FED’S POWELL: WAGE GROWTH HAS SHOWN SOME SIGNS OF EASING
• 22 Mar – 19:35:44 [RTRS] – FED’S POWELL: LONGER-TERM INFLATION EXPECTATIONS REMAIN WELL ANCHORED
• 22 Mar – 19:36:40 [RTRS] – FED’S POWELL: WE ARE CONTINUING PROCESS OF SIGNIFICANTLY REDUCING OUR BALANCE SHEET
• 22 Mar – 19:36:43 [RTRS] – FED’S POWELL: SINCE LAST MEETING ECONOMIC DATA HAS COME IN STRONGER THAN EXPECTED
• 22 Mar – 19:36:59 [RTRS] – FED’S POWELL: BUT WE THINK RECENT BANKING EVENTS WILL RESULT IN TIGHTER CREDIT CONDITION
• 22 Mar – 19:38:44 [RTRS] – FED’S POWELL: REDUCING INFLATION IS LIKELY TO REQUIRE PERIOD OF BELOW TREND GROWTH
• 22 Mar – 19:41:15 [RTRS] – FED’S POWELL: LAST TWO WEEKS WILL CAUSE A WEIGH ON DEMAND  AND INFLATION

Now it comes:

• 22 Mar – 19:44:35 [RTRS] – FED’S POWELL: AT MEETING I HEARD A SIGNIFICANT NUMBER OF PEOPLE ANTICIPATING TIGHTENING CREDIT CONDITIONS
• 22 Mar – 19:44:47 [RTRS] – FED’S POWELL: THIS WAS INCLUDED IN THEIR PROJECTIONS
• 22 Mar – 19:44:55 [RTRS] – FED’S POWELL: THEREFORE THEY WERE INCLUDING THAT FORECEAST FOR TIGHTER CREDIT CONDITIONS IN THEIR FORECASTS
• 22 Mar – 19:45:21 [RTRS] – FED’S POWELL: MOST OF INTERMEETING PERIOD POINTED TO HIGHER RATES
• 22 Mar – 19:45:33 [RTRS] – FED’S POWELL: BUT POSSIBILITY OF CREDIT CONDITIONS TIGHTENING DUE TO BANKING STRESSES OFFSET THAT

Here even more, disinflation is alive?

• 22 Mar – 19:48:13 [RTRS] – FED’S POWELL: YES, DISINFLATION IS ABSOLUTELY OCCURING
• 22 Mar – 19:48:24 [RTRS] – FED’S POWELL: THE STORY ON DISINFLATION IS INTACT
• 22 Mar – 19:48:28 [RTRS] – FED’S POWELL: GOODS INFLATION IS COMING DOWN EVEN IF MORE SLOWLY THAN WE WOULD LIKE
• 22 Mar – 19:48:48 [RTRS] – FED’S POWELL: WE STILL DON’T HAVE SIGN OF PROGRESS ON SERVICES EX HOUSING SECTOR
• 22 Mar – 19:49:07 [RTRS] – FED’S POWELL: WE DON’T YET SEE PROGRESS ON CORE SERVICES INFLATION EXCLUDING HOUSING
• 22 Mar – 19:49:10 [RTRS] – FED’S POWELL: INFLATION DATA, HOWEVER, DID POINT TO STRONGER INFLATION
• 22 Mar – 19:54:00 [RTRS] – FED’S POWELL: PARTICIPANTS DON’T SEE RATE CUTS THIS YEAR
• 22 Mar – 19:55:28 [RTRS] – FED’S POWELL: AT END OF DAY WE WILL DO ENOUGH TO BRING INFLATION DOWN TO 2%

About SVB: an isolated case, but how could this bank, which was under supervision, go so wrong? Because that much is already clear, the bank took far too much risk.

• 22 Mar – 19:47:22 [RTRS] – FED’S POWELL: I REALIZED RIGHT AWAY THERE WAS A NEED FOR A BANKING REVIEW
• 22 Mar – 19:51:10 [RTRS] – FED’S POWELL: FED SUPERVISORS SAW THESE RISKS AND INTERVENED
• 22 Mar – 19:51:43 [RTRS] – FED’S POWELL: FOR OUR PART, WE ARE DOING A REVIEW AND MY ONLY INTEREST IS WE IDENTIFY WHAT WENT WRONG
• 22 Mar – 19:52:50 [RTRS] – FED’S POWELL: SVB WAS AN OUTLIER
• 22 Mar – 19:52:20 [RTRS] – FED’S POWELL: WE DO NEED TO STRENGTHEN SUPERVISION AND REGULATION
• 22 Mar – 19:53:06 [RTRS] – FED’S POWELL: REGULATORS WERE ON THIS ISSUE, BUT SVB STILL FAILED
• 22 Mar – 20:04:03 [RTRS] – FED’S POWELL: SPEED OF THE RUN ON SVB SUGGESTS NEED FOR POSSIBLE REGULATORY, SUPERVISORY CHANGES

Still!

• 22 Mar – 20:05:59 [RTRS] – FED’S POWELL: TAKEOVER OF CREDIT SUISSE SEEMS TO HAVE BEEN A POSITIVE OUTCOME
• 22 Mar – 20:06:08 [RTRS] – FED’S POWELL: THAT TAKEOVER HAS GONE WELL SO FAR