Fed speakers could be set for hawkish podium after Powell released the doves



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Close —  After Federal Reserve chairman Jerome Powell’s dovish remarks this week gave the greenlight for bets on more rate cuts, the Fed’s chief fellow colleagues are set to hog the limelight and could likely strike a hawkish tone to send Treasury yields on the up and up.

“[W]e believe that it is likely that Fed speakers over the coming weeks will lean more on the hawkish side, especially with regard to the long-term path for policy interest rates — the thing that could be material for the 10-year yield,” Macquarie said in a recent note. 

Following the Fed’s decision to keep interest rates unchanged at the Mar.20-21 policy meeting and continue to signal for three rate cuts this year, Powell leaned into a dovish stance, shrugging off the recent upside surprise in inflation seen in January and February as bumpy. 

“Powell’s ‘dovish’ tone came somewhat as a surprise to us, and probably ran counter to the thinking of other Fed policy officials,” Macquarie added, flagging the jump in overnight index swap market pricing an 85% chance of four cuts in 2024.

But the Fed’s updated summary of economic projections showing that the Powell’s Fed colleagues are expecting stronger economic growth, higher inflation, and a modest rise in the Fed’s longer-term rate offer clues to “what the other Fed officials were thinking,” Macquarie says, painting a far less dovish picture than the one delivered by the Fed chief. 

The upward revision to Fed’s economic and rate projections and their distribution of risk pointed to a “somewhat more hawkish Fed lurking below the surface of Powell’s discourse,” Macquarie said, forecasting just two rate cuts this year and next.

Atlanta Fed president Raphael Bostic, Fed governors Lisa Cook and Christopher Waller and chairman Powell are among a host of Fed speakers on the podium next week.  

The minutes of the Fed’s March meeting, slated for April, could also underscore the divergence between Powell’s dovish take and that of his colleagues.

Still, the overarching takeaway from the Fed last week was “policymakers continue to want to cut rates and are waiting for an opportune inflation window to do so,” MRB Partners said. A “technical easing” in inflation, courtesy of base effects could provide that opportunity to take advantage of the window of descending year-over-year core inflation,” MRB added.


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