Fed’s uncertainty does not scare markets

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Fed’s outlook and market response

The market liked yesterday Jay Powell and the Federal Open Market Committee heard. No one was chartwheels, but the shares, which enjoyed a strong day before the statement and a press conference, were after the end of the day, even if a little extinct. The treasury product fell – three main points for two years, then 10 years. Dovish meeting, then?

Not really. It is easy to imagine a world where investors want to say yesterday and do not like a little. Committee reduced Outlook for growth Meaningful, increased the worldview for unemployment and inflated worldview. Here is the median numbers, opened by arrows, as submitted in the summary of the Fed:

There is a word in this way and this is a bad word: stagflation. The Fed does not predict a bad event of the Great S, but still, expectations, on both sides of the Central Bank’s mandate. The Fed became clear about the reason: the sharp decline in the investor, business and consumer feeling, especially tariffs, especially the crochet.

Yes, the projection for interest rate policy remained the same. However, this projection is average and hides an action in the direction of tougher policy. Three highest and lowest personal calculation and “central trend” expectation, the expectation of politics went to 3.6-4.1 percent to 3.9-4.4 percent. This is nothing. At a press conference, Powell drew attention to the uncertainty about the forecasts of the committee members – not only higher, but asymmetric and almost slow growth and higher inflation. Below is the unemployment rate of the Fed (compared to historical levels) and in which side “Uncertainty of the members of the committee”

This is all a little fun. Why is the answer to a dollar market? There are several opportunities:

• The Fed sent a message that has already received in the market. The market increased the growing risks to the growth and inflation of political concerns.

• The Fed had a comfort whose teeth did not show their teeth due to the risk of inflation that posed by tariffs. Powell, as long-term inflation expectations are under control, stressing that the tariff will not look at the induction price increase, he took a measured tone. This is not a central bank to combat the executive department.

• After a month, the market, a desperate month for good news, decided to draw attention to the unchanged interest forecasts and remove everything.

He leaves readers to decide their weight among those three.

Qt end

Fed, yesterday’s market surprised the market, declared a dramatic slowdown to the speed of quantity: a change to allow $ 25 billion worth $ 25 billion per month. It is not surprising that QT ends; by most EventsThe Fed’s “wide” goal is not close to the purpose, but not abundant and bank reserves.

Since the end of last year, most forecasts have claimed that the GT will end in the first half of the year, it will probably end in June. The picture changed since then – the minutes of the FOMC meeting, the “debt ceiling dynamics of the borrowed dynamics of the debt” said the CTs showed the end of the CTs. Nevertheless, the analysts we talked before the meeting suggested that QT Sunsetting GT will start in May in May.

Yesterday, the department said that it is only part of the normal course of the QT, not only part of the normal course of the QT and did not reflect the debt ceiling. This is a message different from the notes of the January session. And such a concern would be true: the debt ceiling or the limit of the United States continues to be financed, the beginning of this year was restored after the two-year postponement. Until the debt limit is re-removed or suspended, the Treasury Net cannot borrow a new borrower. Instead, he considers $ 414 billion in the Fed.

The clock is tapping. Even with the new tax revenue, the Treasury, “Summer was set to run out of money for the Wellington management of the potential August. After that, you need to take the treasure “Emergency measures“Protect the US government from default.

Congress is likely to be removed from the debt ceiling before this happened – although it is almost a political theater around. After that, the treasury should have a new loan to rebuild their coffins. If it had to coincide with this QT, it would double tension in the liquidity of the financial system fed to prevent the Fed, DHINGRA, BNP Paribas Dhingra says:

When working on the treasure cash balance, it adds liquidity to the system (bank) system. However, when the treasury restores the balance of money (by giving more treasures), this money returns from the banking system to the Fed account. It takes liquidity from the banking system. Qt also takes liquidity from the system.

Treasury has led to New in 2022 when the QT continues with the QT. However, more liquidity and more liquidity sources (inverted procurement programs) at that time. If an explosion of the QT and a new treasury emission occurred at the same time, liquidity can threaten the crisis.

The slowing of QT is a pleasant news for the market. Shares appreciate additional liquidity. And although QT and QT have the impact of treasury productivity, it is likely that everything is equal to the end of the QT should reduce treasury productivity.

We are pleased to receive Powell according to his word. However, it happens that slowly can be a tense summer in Capitol Hill and financial system. Some Republicans pay attention to the national debt, most democrats seek ways to push against Trump. As we decided to do what the Congress will do about the debt ceiling increases the risk of financial brinkanhip. Best to take risks outside the desk possible.

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