Fed: Dramatic shift on monetary policy guidance - Westpac

Sandeep Kanihama FXStreet Contributor

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.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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