US stocks went on a Fed rollercoaster ride; weakening after the statement suggested the Fed will stick to their rate hiking guns, but rallying after a dovish press conference that didn’t see Powell defend their dot plots and had him say for the first time that the disinflation process has begun. The Fed could complete its tightening cycle by March if inflation reports indicate that pricing pressures are continuing to ease. This decision may be interpreted as being dovish by some. They could have provided a half point increase today, and stressed they were still far away from getting inflation back at target.
Fed
The Fed’s decision went as expected as policymakers downshifted again and signaled more rate hikes are coming. As inflation continues to be high, the Fed is sticking with their dot plots. Although they acknowledge that inflation has slowed down, there is still much to be done to bring it back to target. Inflation is still far from target, so the Fed is worried about it reacceleration. The Fed is clearly telling the markets that they are prepared to go to great lengths to ensure they can conquer inflation.
Initial reaction was to a stronger dollar, which had swaps prices at a peak rate just below…
