Fed forward guidance changes the behavior of investors. "Listen to what I say, and I will tell you where we are headed". The focus is on the words of the Fed Chairman and not just Fed action. The Fed action like today was clearly telegraphed. The reaction from the announcement was minimal before Chairman Powell spoke; nevertheless, he provided the magic words that a 75 bps rise was not being actively considered. As soon as the announcement was made, the stock market was moving higher, yields moving down, and the dollar selling off.
Was the comment intentional? Powell is very careful with his comments, so my impression is yes, but it is restrictive and shows the Fed as not a serious inflation fighter.
No comments:
Post a Comment