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Higher for longer and faster hikes


Fed Chair Powell’s Monetary Policy Report The testimony was consistent with widespread expectations for a more stringent and longer-lasting policy stance than the official position has been since early in this year. Powell was adamant, as he did with his Jackson Hole comments. He suggested that tightening could be accelerated. We were surprised by the surprise response of the markets. Stocks and bonds immediately show bearish reactions With Treasury yields are rising and Wall Street is slumping The USDIndexFirming was on the other side. The decision to up-shift back at a pace of a half-point rate increase pace was made. March 22 isn’t a done deal. Powell stressed it depends crucially on the “totality” of upcoming data in Friday’s nonfarm payrolls, and the following CPI release on March 14.

Though the FOMC’s mantra for several months has been higher for longer, Only recently have the markets taken this message seriously. A second signal was sent to this extent, and Chair Powell, like Jackson Hole, boosted the possibility for a faster pace, back at a 50 basis points hike after the February step down to a 25 basis-point move.

As it implies that the Fed made a policy mistake in tempering the pace, it is unlikely they would reverse course so quickly. It…

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