Wall Street seems to be ending the week on a low note, as investors get nervous about the possibility of Fed tightening. It isn’t just Fed expectations that are rising, traders are also expecting the ECB to send rates much higher. Global growth is likely to be hit harder as the monetary policy becomes more restrictive in the coming months.
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Fed’s Bowman reiterated inflation is still too high and that they need to continue hikes until we see more progress. The Fed is seeing inconsistent data about economic conditions, however. It doesn’t look there is a chance that the Fed will be holding anytime soon, which should keep sending yields higher at the short-end of the curve.
Fed’s Barkin however wants to remain flexible and favors a 25 basis point increase. He acknowledged that he was not ready to declare victory in the fight against inflation.
Friday’s sell everything trade initially sent the dollar higher as risk aversion appears to be running wild as Fed tightening jitters make it more likely the US economy is recession bound. Bullard, Mester, Bowman and the latest round of hawkish Fed talk have swapped pricing rate hikes at March and May…