With the Federal Reserve about to enter its pre-meeting media blackout period, investors will be paying close attention when Chairman Jerome Powell speaks at...
With the Federal Reserve about to enter its pre-meeting media blackout period, investors will be paying close attention when Chairman Jerome Powell speaks at the Brookings Institution at 1:30 p.m. in New York on Wednesday.
Although two other senior Fed officials are due to deliver public remarks on Wednesday and Thursday, Powell’s speech at Brookings has been widely cited by market analysts as the most important event for markets this week. What’s the plan for December? At this point, markets have internalized expectations for a 50 basis point rise in the Fed funds rate in December, the Sevens Report authors said. Practically every Fed official who has spoken since the November meeting has suggested that it’s time to slow the pace of interest rate hikes while the central bank waits to see what impact this dramatic tightening of monetary policy will have on the economy.
It’s also possible Powell could surprise markets by hinting that a 75 basis point hike might still be on the table next month. If this happens, expect it to be a “negative for markets,” the Sevens Report team said. The Sevens Report authors expect Powell will acknowledge “some progress” on inflation, with the caveat that it’s “still entirely too high and the Fed remains a long way from its inflation goals.”
The terminal rate Ever since the Fed started the process of telegraphing the possibility of a 50 basis point rate hike in December, the market’s focus has shifted to where the Fed funds rate will likely peak next year. This peak level is referred to as “the terminal rate” by economists and market analysts, since it represents the highest level that rates will reach this cycle.
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