1 year ago

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Jerome Powell FOMC Speech Live | Interest Rate | FOMC | Market Reaction | Federal Reserve Chair
#FOMC #Crypto #Bitcoin

Markets have priced in a near-100% certainty that the Fed will announce an interest rate rate hike of 0.25 percentage point when its meeting wraps up Wednesday.

But the focus likely will be more on Chairman Jerome Powell, who could push back on the idea of a looser Fed later this year.

“He is on a very tight monetary policy tightrope, where he can’t allow the market to think this is the endgame,” said Quincy Krosby, chief global strategist for LPL Financial.

This week’s Federal Reserve meeting will be remembered more for what policymakers say than what they do.

That’s because markets have priced in a near-100% certainty — 98.9% to be exact, as of Tuesday afternoon — that the Federal Open Market Committee will announce a 0.25 percentage point interest rate increase when the two-day policy meeting wraps up Wednesday afternoon, according to CME Group data.

While there’s often strong market consensus heading into FOMC meetings, it’s rarely this high.

What markets are unsure of is where the Fed goes from here. Traders are betting the central bank will hike a quarter point once more in March then stop, pause for several months, and then start cutting toward the end of the year.

Conscious that the fight against inflation is far from over, despite some encouraging data lately, Chairman Jerome Powell could push back on the idea of a looser Fed so soon in the future. Fed projections released in December indicate no cuts this year and continued rate hikes.

“He is on a very tight monetary policy tightrope, where he can’t allow the market to think this is the endgame,” said Quincy Krosby, chief global strategist at LPL Financial. “It’s prudent for him to be careful. It would be almost reckless for him to have the market believe that they’re just about finished and inflation is where they want it. Inflation is certainly not where they want it.”

With the careful communication path Powell must walk in mind, here’s what to expect when the FOMC’s post-meeting statement is released at 2 p.m. ET:

Rates
Over the past few weeks, Fed officials have been explicit in stating that, at the very least, they can start approving smaller moves than the four consecutive 0.75 percentage point increases in 2022. That began in December with a 0.5-point hike, and will continue with this highly anticipated move.

That will take the fed funds rate to a target range of 4.5%-4.75%, the highest since October 2007. The funds rate is what banks use as a benchmark for overnight borrowing, but it flows through to many consumer credit instruments like car loans, mortgages and credit cards.

Though some central bank officials, such as St. Louis Fed President James Bullard, have suggested the rate hike could be half a point, there’s virtually no chance of that happening. A quarter point is a lock.

The statement
For the most part, the post-meeting statement has changed little except for a few notable tweaks.

There is some speculation that the statement could get adjusted a bit more to add uncertainty about how much more aggressive the Fed wants to get. One key phrase that has been part of each statement since the hikes began in March 2022 is that committee members feel “ongoing increases in the target range will be appropriate.”

That language could get softened, and it’s likely the first place market participants will look for the Fed to tip its hand to acknowledge that the rate-hiking cycle is nearing an end.

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