Last night a subscriber asked how I think the Fed plays it this week. In light of the rampant speculation underway in equity and crypto markets, tightened credit spreads, looser FCI since November, and the recent inflation inflection higher, I assumed Powell would err somewhat hawkish:
- Dots go to 2.
- Powell walks back his dovish Congressional testimony a bit (that audience prioritizes growth ahead of inflation with the election, so maybe he was telling them what they wanted to hear).
How would the market react? I was of two minds: