Fed’s aggressive minutes put markets at stake
2023-08-17
Summary:
The Fed expressed concerns at their last meeting on ‘significant upside risks’ to inflation though some urged caution for larger impact of tightening on economy.
The Fed expressed concerns at their last meeting on ‘significant upside risks’ to inflation though some urged caution for larger impact of tightening on economy.
The minutes also noted that policymakers need further evidence that price pressures are subsiding in order to become more confident that inflation is ‘clearly on a path’ back to the 2% target.
No official has suggested the Fed will cut rates again this year. A soft landing is now more likely as the US economy grew at a 2.4% annual rate in the second quarter, up from 2% in the previous one.
Investors have priced in an 89% chance the Fed will keep interest rates level at its September policy meeting, and a 21% chance the Fed could begin cutting rates early next year, according to the CME FedWatch tool.
The Yardeni Research resident argued that higher economic risk are priced in over the next decade with the 10-year Treasury note notching nearly a 10-month high of 4.213% on Wednesday.
That yield could potentially rise above 4.5% this year, which could take the S&P 500 down to its 200-day Moving Average of around 4,121 or even lower, he added.
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