The biggest Fed dove rules out 50 basis points
There has been a quick move in the dollar, gold and stock markets on Bullard's comments. He characterized a July cut as 'insurance' rather than the start of an easing cycle. He also said it wasn't the time for a 50 bps cut.
The market had been pricing in a 40% chance of a 50 basis point cut. But you have to imagine that if the biggest dove at the Fed doesn't want to see 50 bps, that it's not going to happen.
This is a good example of how knowing central bankers pays. Bullard is a major dove. If he would have talked in favor of a 50 bps cut, it wouldn't have mattered because he's at the fringes on that policy. But when a dove makes a hawkish comment, or a less-dovish comment, it caps the limit on the market.
A 40% probability is a big chance and it's pretty much gone now. That's going to need to be re-priced into the the dollar and bonds.
The worry now is that if Bullard isn't that so dovish, maybe others aren't either. Maybe we'll only get one insurance cut rather than the 3-4 cuts the market is pricing in the year ahead.
The US dollar jumped to 107.25 from 106.88 against the yen and made a similar move across the board.
I think this is a big development and would be bigger if Powell wasn't speaking in 10 minutes.
