The Fed hath spoken.
The Fed hath spoken.
As we discussed yesterday, the Fed’s 75-basis-point move was basically a foregone conclusion. And the central bank delivered, announcing it would raise interest rates once again by three-quarters of a percentage point — its fourth straight move of that size since it began trying to tame inflation in earnest this spring.
So what did we learn from Chairman Jay Powell’s closely watched speech?
A few highlights:
Markets initially shot up when the Fed released its policy decision, which contained a new bit of verbiage that, in the wonky world of Fed-watching, counts as scintillating: “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Traders seemed to read that as: Don’t worry, you guys, the worst is almost over…
But the party was short-lived.
Powell took the stage and promptly threw cold water on any Wall Street hopes for a near-term pivot toward monetary easing with statements like:
“It’s very premature in my view to be thinking about or talking about pausing our rate hike. We have a ways to go.”
The Dow ended the day down more than 500 points, or 1.6%. The S&P 500 sank 2.5%, and the Nasdaq fell 3.4%.
BIG PICTURE
The Fed is operating on data that’s offered a murky view of the economy’s health in recent months.
