Fed Unfiltered, Weekly Report: Monday Morning Reset (2/6/23)

Quick Overview

The Fed increased the target rate by 25bps last week (to 4.75%). In the post meeting press conference, Jerome Powell talked about “a couple of more rate hikes to get to that level we think is appropriately restrictive”.  Mary Daly doubled down in an interview on Friday saying that the Dec SEP terminal rate (5.10%) is “a good indicator of where policy is at least heading.  But I’m prepared to do more than that if more is needed.”

Based on Fed Official commentary, expect:

• 25bp rate hike March 22.
• 25bp rate hike May 3.
• A terminal rate of 5.25%.

Keep in mind:

• At the March 21-22 FOMC, a new SEP will be published, including a new terminal rate.
• And, the Fed can and will pivot on a dime – the market is currently forecasting a pivot (aka rate cut) before YE – on Wednesday, Powell appeared to catch himself from saying – we can certainly cut rates – when he didn’t complete this sentence: “but if we feel like we’ve gone too far, we can certainly” – this comment is at 13:58 minutes into the press conference.