CIBC on the Fed decision Wednesday, this in brief:
- This is a hawkish pause, as the committee says it will be looking for signals on the need for additional firming, rather than a balanced statement that would have referenced potential moves in either direction. Similarly, the statement highlighted that policymakers are “highly attentive” to inflation risks, with no similar statement on recession risks. When asked about recession risks, Powell said that it was his view that the economy would still see modest growth over the rest of the year, and he therefore does not foresee a recession. But if, as we expect, Q2 sees little or no growth, and inflation signals continue to moderate, the May hike should prove to be the last for this cycle, with the first easing not likely until 2024, as we’ll also need time for inflation pressures to sufficiently abate.
- Two-year yields are modestly lower as we write relative to just ahead of the statement, with the market ignoring the slight hawkish bias and retaining the view, which we don't share, that we'll see rate cuts before the end of the year.
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ICYMI, the FOMC hiked its Fed Funds rate on Wednesday:
