Fed Chair Powell says FOMC moving forward carefully as risks of both under- and over-tightening are becoming more balanced

POLICY STANCE:

• Premature to conclude with confidence that Fed has achieved a sufficiently restrictive stance, or to speculate on when policy might ease


• Fed will raise rates again if needed to lower inflation


• Fed making decisions on a meeting-by-meeting basis

INFLATION:

• Fed has made considerable progress in lowering inflation


• Welcomes recent softening in inflation data, need to see more progress


• Core inflation is still too high

ECONOMY:

• Economic outlook is unusually elevated


• Fed Funds range is well into restrictive territory


• Expects spending and output to slow over the next year

LABOUR MARKET:

• Unemployment is up, but still historically low


• Labour market is still "very strong"

Full remarks here

Reaction details (16:25)

• There was an initial hawkish kneejerk reaction (stocks and UST selling against Dollar buying) before markets reversed in a dovish direction, with USTs making fresh peaks of the session and Fed pricing becoming even more dovish with now over 125bps of Fed cuts priced across 2024 vs c. 115bps priced beforehand.

Analysis details (16:45)

• Taking into account the strong dovish market reaction in wake of his comments, it's not a stretch to say there were fears Powell would be a bit more hawkish/forceful in his pushback from Fed's Waller on Tuesday. 

01 Dec 2023 - 16:00- Fixed IncomeImportant- Source: Newswires