In his prepared remarks to the Senate Banking Committee this morning, Fed Chair Powell shifted back toward Jackson Hole-ish stance with two comments of specific note:
A shift in his ‘disinflation’ perspective…
…inflation has moderated somewhat since the middle of last year but remains well above the FOMC’s longer-run objective of 2 percent… That said, there is little sign of disinflation thus far in the category of core services excluding housing, which accounts for more than half of core consumer expenditures.
And a hawkish warning…
…. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes… The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.
Ironically, none of this is new, but the market did not like being slapped out of its euoptian dream-state back to that ‘data dependent’ reality-check…
Terminal rate expectations exploded higher to 5.60%…
With the odds of 50bps rate-hikes in March and May spiking higher (50% and 36% respectively)…
Stocks immediately tanked…
Treasury yields shot higher, led by the short-end…
The 10Y Yield spiked up to 4.00% and stalled…
The dollar soared…
Gold puked more…
Crypto was hammered with Bitcoin back below $22,000…
So now we wait for a reversal on something Powell says? Or will a big NFP miss ‘fix’ all this?
