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Market Update – December 15 – FED: Inflation Remains Public Enemy No. 1


The FED, as expected,  announced a 50 bp Increase in the federal funds rate  to place it in a target range of 4.25%-4.50% (the highest level in 15 years – since 2007). Powell pointed out that “We have more work to do” and that “there is a long way to go” expecting “continued increases”. The first is expected to be 25bp in February, which “will depend on incoming data” and from there the pace will be set taking into account “the cumulative tightening of monetary policy”. 17 of 19 members anticipate the terminal rate to be above 5.1% In 2023, “there are no rate cuts in the projections for 2023” Until the Fed, there won’t be one. We have complete faith in Inflation is continually falling to the target” It will be responsible for this.“maintain restrictive rates for a sustained period of time”.

The higher for longer mantra continues – its not the rate of increase but how long it remains elevated. Markets not convinced, but it sounds hawkish. 

  • The USD Index The FED announcement moved north of the FED announcement was met with a gyration 104.00 But, they dropped to new 6-mth lows 103.33 Before recovering to 103.85 now. US Stocks The rally was strong on the open, but it fell after FED and at close.-0.42-0.76%). Yields Also held at lows as

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