Even if there are certain quarters of the market trying to poke and prod at the narrative of a Fed pivot, it is unlikely we will get that today. I mean, let’s be clear. The Fed surely cannot risk showing any signs of cracking under the pressure when they still need to deliver a strong resolve in fighting the inflation battle.
Sure, inflation isn’t running away to much higher levels in the past two months or so but we are still nowhere near the 2% target set out by the central bank. So, will Powell & co. really risk a dovish communique when there is blood in the waters?
Their credibility to address the inflation issue is at stake and in a perfect world, they will be firm and resolute – as they have been over the past few months. I mean, why not when economic conditions continue to let them get away with that?
But we all don’t live in a perfect world now, don’t we? And going into the meeting decision today, markets are sniffing for any slip up to capitalise on that. So, let’s see if the Fed can thread the needle or if risk trades will be able to find something to shout about.