Neutral Fed messaging but markets find a dovish angle – Standard Chartered

John Davies, US Rates Strategist at Standard Chartered, explains that the Fed set the market up for a hike and it duly delivered as well last week and SC view the messaging as broadly neutral, especially with the market still some way from fully pricing in the policy rate path implied by the December projections (dots).

Key Quotes

“However, markets interpreted the absence of explicitly hawkish signals from the Fed as dovish. The FOMC statement was moderately more upbeat on the economy and projections were largely unchanged. The median dots still showed three hikes in 2017 and 2018 and a 3% longer-run policy rate. The one clear dovish surprise was the on-hold dissent by Minneapolis Fed President Kashkari, but this does not justify a 10bps drop in the 10Y US Treasury (UST) yield.”