One leading Fed watcher said the market is misinterpreting Jerome Powell's comments.
The market seemed to take Fed Chair Jerome Powell at his word when the central bank chief played down the significance of the dot plot forecast of two additional rate increases at his press conference. Fed funds futures are pricing in just an 8% chance of two more rate hikes by the end of the year, according to CME’s FedWatch tool.“We...
Tim Duy, chief U.S. economist at SGH Macro Advisors, says investors should reach the opposite conclusion. In fact, Powell initially used the word “skip” and then quickly said he should not call it a skip. A skip implies that the central bank would increase rates after not hiking in June.The economic data released ahead of the June meeting was more consistent with a hike than a pause. However, Powell and crew wanted to have more information on the impact of the regional bank crisis.
Powell was asked about the fact there isn’t much data ahead of the July decision. But he replied that the data ahead of the June meeting would be considered as well. “It would be a three-month period of data we can look at,” he said. U.S. stock futures ES00 were pointing to a weaker start Thursday, as the yield on the 2-year Treasury TMUBMUSD02Y rose to 4.73%.
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