Fed Chair Powell repeats we are not confident we've achieved sufficiently restrictive stance; if it becomes appropriate to tighten policy further, "we will not hesitate"

• Fed will continue to move carefully and decide meeting by meeting.


• Attentive to risk that stronger growth could undermine inflation progress, which could warrant a monetary policy response.


• Inflation has come down and remains well above 2% target.


• Gratifed by inflation progress, but still a "long way to go".


• Labour market remains tight, but moving into better balance.


• Expect GDP growth to moderate in the coming quarters, but remains to be seen.


• A greater share of progress on inflation ahead may have to come from tight monetary policy, not just supply-side improvement.


• Too soon to know if policy challenges of "effective lower bound" will be a thing of the past.


• Fed will begin next framework review in the latter half of 2024 and announce the results about a year later.

Full remarks via Federal Reserve

Reaction details (19:12)

A hawkish reaction has been seen in markets:

• T-Notes (Z3) fell from 107-26 to 107-17+ within ten minutes, with the front-end leading the selling as gauged by 2s10s flattening from -36.5bps to -39.5bps.


• Fed pricing for December remains little changed at a c. 10% hike risk implied.


• E-mini S&P (Z3) fell from 4378.75 to 4369 within a few minutes.


• DXY rose from 105.65 to highs of 105.84 within ten minutes, with USD/JPY rising from 151.15 to peaks of 151.31.

Analysis details (19:06)

• 
  Powell said at the FOMC he was not confident the Fed had reached sufficiently restrictive.


• 
  WSJ's Timiros posts on X, "By doing little to lay the groundwork for a December rate rise, Powell suggests the Fed will remain on hold while making clear this doesn't mean they're declaring an end to rate rises."

09 Nov 2023 - 19:00- Fixed IncomeData- Source: Newswires