Technical Analysis

FOMC response – dovish statement, hawkish press conference

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%.


Wild major FX swings on the mixed messages, EUR/USD for example:

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