Fed: Dramatic shift on monetary policy guidance - Westpac
|Sean Callow, senior currency strategist at Westpac, notes that during the week, US Federal Reserve chairman Jay Powell surprised by delivering a dramatic shift on monetary policy guidance, helping US stocks to fresh 5 month highs.
Key Quotes
“After raising rates four times in 2018, global markets had expected to see a fairly sharp twist in guidance at the FOMC meeting this week.”
“But the FOMC still managed to deliver a dovish surprise. In the Dec 2018 projections, 11 of 17 members projected either 2 or 3 rate hikes over 2019, with a median of 2 hikes. The median is now for no hikes at all in 2019 and just 1 by end-2021. That’s down from 3 in December.”
“Global markets were clearly surprised by the outcome, with officials cutting their forecast for US growth, abandoning projections for rate rises this year and a surprisingly abrupt end to the process of offloading their bond holdings by September this year.”
“US 10 year Treasury bond yields traded below 2.5% for the first time since January 2018, the S&P 500 hit highs since October 2018 and the US dollar slipped from 20 month highs.”
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