“Powell delivered the message he wanted to deliver, and some of it reflects the uncertainty or the lack of consensus across the committee,” said Michael de Pass, global head of rates trading at Citadel Securities. “The market is going to trade the range that we’ve now carved out quite clearly.”
Some investors attributed Powell’s move to downplay the prospect of a March cut to the boom in stocks and credit across Wall Street — complicating the Fed’s bid to snuff out inflationary pressures. Yet confidence among investors remains intact that the world’s most important central bank will cut enact a dovish pivot in the months ahead, even as the scale and timing of the policy easing remains subject of intense debate.
Signs of economic cooling were bolstered by data released Wednesday that showed a slowdown in hiring and wage costs. Treasuries were also bolstered after New York Community Bancorp reported an unexpected quarterly loss, evoking the worries about the US banking system that flared last year after the collapse of Silicon Valley Bank.
Those bond-market gains extended as Powell wrapped up his press conference late in the day. Two-year Treasury yields tumbled 13 basis points to about 4.2%, with rates on longer-dated securities dropping by nearly as much. The advance was pared early in the Asian trading day.
Traders also remained committed to their aggressive rate-cut bets, even if the timing of the first move may be pushed off until May. Swap contracts are still pricing in nearly six Fed quarter-point cuts by the end of December. That’s about double the median projection from Fed officials’ quarterly rate forecasts.
Investors are preparing for the Fed “moving from hikes to cuts,” Meghan Swiber, director of US rates strategy at Bank of America Corp., told Bloomberg Television. “It’s really just about the timing.”
This article was provided by Bloomberg News.