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Federal Reserve seen more ‘hawkish’ as Powell tees up tapering, but the market signals economic growth concerns

Federal Reserve seen more ‘hawkish’ as Powell tees up tapering, but the market signals economic growth concerns

9/23/2021 6:32:00 PM

Federal Reserve seen more ‘hawkish’ as Powell tees up tapering, but the market signals economic growth concerns

Investors were ready for the Federal Reserve to tee up a possible announcement of a tapering of its bond purchases in November in its policy statement...

The prospect of the Fed this year beginning to slow its monthly bond purchases, with an eye toward gradually ending them by mid-2022, doesn’t worry Daniela Mardarovici, co-head of U.S. multisector fixed income at Macquarie Asset Management. That’s a “sigh of relief” as the market no longer needs that accommodation and the Fed has been carefully messaging its intention to taper for some time, she told MarketWatch in an interview.

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But Mardarovici sees the market questioning the Fed’s ability to raise interest rates, despite it appearing more “hawkish” following its policy meeting Wednesday, with central bankers projecting a possible rate hike next year, she said.“The most important piece of this puzzle is that longer-term rates are actually lower since June,” a sign the market believes the economy may not be strong enough for the Fed to hike “in any shape or form,” said Mardarovici. Longer-term yields moved slightly down while short-term rates edged up Wednesday as the market digested details from the Fed meeting, she explained, in an “almost imperceptible” flattening of the yield curve.

Slowing economic growth combined with rising inflation could put the Fed in a “conundrum,” according to Mardarovici. While the Fed could tame inflation by raising rates, doing so too quickly risks hurting the economic recovery.Some investors worry the increased pace of inflation in the pandemic may stick around longer than expected, with market analysts pointing to pressures building from supply-chain disruptions as well as labor market shortages. Limited supply is being met by elevated consumer demand for goods, as people have spent less on services amid fear over COVID-19.

“The reality of the situation is that we’re still beholden to the trajectory of the virus,” said David Lebovitz, global market strategist at JPMorgan Chase & Co.’ s asset management unit, in a phone interview. “There are going to be knock-on effects when it comes to the supply chain globally.”

While lingering supply-chain problems may add to inflationary pressures for longer than people may expect, Lebovitz said that higher costs should still prove transitory. That’s because rising inflation is a cyclical element of the pandemic rather than a structural concern, he explained.

Read: Hawks rule the roost at Fed, economists sayAlthough the Fed appeared “a little bit more hawkish than expected” after its meeting this week, it came as no surprise that it’s moving towards taper, and markets were “already priced for a first hike in December of ‘22,” according to remarks made by John Bellows, a portfolio manager at Western Asset, during a fixed-income markets panel at the Morningstar Investment Conference Wednesday.

But “they’re moving ahead with this taper program in the context of a pretty material downgrade to growth,” Bellows said. Against the backdrop of this risk, he said “10-year yields and 30-year yields were actually lower” Wednesday.On Thursday morning, the yield on the 10-year Treasury note TMUBMUSD10Y, 1.399% was trading almost 7 basis points higher at around 1.38%. That’s still below a yield of about 1.44% at the end of June, according to Dow Jones Market Data.

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The “reality of peak growth happening in the second quarter is setting in,” said Bellows, suggesting that lower retail sales since April are behind expectations for slower growth in the third quarter.Meanwhile new surveys of the economy show the U.S. is still expanding at a rapid pace, though labor and supply shortages remain a drag on growth, MarketWatch reported Thursday.

Read more: MarketWatch »

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Despite Delta variant slowing growth, Federal Reserve signals plans to start reversing some stimulus programsThe central bank said it could soon cut back on some of its bond purchases, and about half of Fed policymakers expect to raise interest rates by end of next year. horrible

Fed Tees Up Taper and Signals Rate Rises Possible Next YearCentral bank officials are preparing to reverse pandemic stimulus programs as soon as November, while new projections showed half of 18 officials expect to raise interest rates by the end of 2022. about time. Yeah .. of course. My father is Santa Claus. Yes, we got stimulus checks but gas, food prices etc soared. So in the big picture we didn’t gain much. I missed out on the 600 ck hope when I file my taxes by 10/15 I can at some point get it

Fed officials say tapering ‘may soon be warranted’ and earlier interest hike pencilled inFederal Reserve officials on Wednesday said that a tapering of bond-buying 'may soon be warranted' and they penciled in a rate hike in 2022, earlier than... We don't buy bitcoin We earn bitcoin From Mining I'm ready to show 10 lucky people on how to earn 1BTC ($43,366.20) and more daily! No referral No withdrawal fees Interested people only Kindly send a DM. For all those who are new to this working from home Bitcoin trading options Here's a little tip: Get a trusted Bitcoin expert and stick to her earn_with_Jens1 Invest and play at similar times each day. Because : In times of chaos, your investment is your anchor to success

Hawks rule the roost at Fed, economists sayFed Chairman Jerome Powell “is a dove among hawks,” economist Diane Swonk says, and investors should pay attention. Definitely respect what Diane Swonk states. Sharp and experienced. thanks 👇👀

U.S. Treasury yields move lower ahead of Fed decisionU.S. government debt prices were higher on Wednesday morning as investors awaited to hear from Federal Reserve Chairman Jerome Powell. pushpendrakum catch it first yields are higher across the curve fyi Michael Burry Warns Retail Traders About the 'Mother of All Crashes'

Stocks hold their gains on Wall Street after Fed statementStocks on Wall Street closed broadly higher Wednesday after the Federal Reserve signaled it may begin easing its extraordinary support measures for the economy later this year. With the use of your cellphone and PC you can earn up to more than $2500 daily from forex trade and Bitcoin investment depending on your capital investment. All thanks to Teri Ijeoma my forex account manager and Bitcoin miner Investor_Teri good luck