Whether or not the Fedspeak this week is as hawkish as the past week’s speeches will depend on how the Fed feels about the economy and the outlook for inflation. If the Fed feels as though conditions have eased too much, the tone of the week’s speeches could shift. That could lead to a more dovish market outlook, which may not be what the Fed wants.
Last week’s Fedspeak, which included statements from Fed Chair Jerome Powell and Fed Vice Chair Richard Clarida, was hawkish in tone. While officials said they want to see further softening in labor numbers, they also said that the economy was strong enough to warrant further interest rate hikes. They also said that the Fed should continue to lift rates despite the possibility that inflation will slow down.
The Federal Reserve’s latest missive didn’t change the market’s consensus on a December rate hike. However, it did spark a rally in risk assets, which are weighing down the greenback. This comes after a soft CPI print last week, which sent traders running for the safety of risky assets. And with global market turmoil continuing to shake up markets, the Fed’s next move will be a matter of interest to markets this week.
The Fedspeak this week will feature a number of speeches and interviews from Fed officials, who will talk about their views on the economy and the Fed’s policy. They will also discuss the impact of the Fed’s plans for balance sheet reduction. They will also discuss consumer spending and the pace of holiday shopping.
The Fed’s plans for rate hikes will be a major focus of Fedspeak this week, as officials will discuss the possibility of a rate hike in two weeks. However, as the Fed continues to talk up the need for interest rate hikes, investors will be watching for signs that the Fed may want to taper or pull back from its aggressive rate hiking cycle.
After the soft CPI reading last week, the market has started to price in a 50 bps rate hike in December. At the same time, the real yield curve has moved into positive territory, which indicates that real rates are not in restrictive territory yet. The market appears to be pricing in a 50 bps rate hike in the December meeting, which would be the first such hike since 2006.
The Fed’s policymakers are not yet ready to claim victory over inflation, though they have said that it is premature to declare victory. They are committed to avoiding premature pullback, as well as limiting inflation to 2%. However, it will take time for the full impact of higher interest rates to work through different sectors of the economy.
Fedspeak this week will be particularly important, as the Fed is set to release minutes from its last meeting on Wednesday. This will provide markets with more insight into the direction the Fed’s monetary policy will take in the future. However, it will also be important to monitor the minutes and see whether the Fed’s tone changes in the wake of the recent market volatility.
