The key market takeaways from the FOMC is that the Fed is highly focused on bringing down inflation and may be less worried about market reaction and volatility. Despite an understandable relief rally, it is likely too early to signal the all-clear for risky assets. The dollar was sharply weaker across the board. Market reaction and investment implications: After Powell left open the possibility of a 50bp rate hike in July rather than reaffirming another 75bp rate hike, the bond market rallied and the yield curve steepened.He flagged that the Fed will decide on a hike of between 50 and 75bp at the July FOMC. He stated the 75bp rate hike is unlikely to become regular policy. While he tried to keep a hawkish tone, we are concerned his message may have gotten lost. He was careful not to dismiss the possibility of a 100bp rate hike and reiterated the Fed remained data-dependent. Press conference: Chair Powell remained hawkish as he described the Fed’s focus on bringing down inflation.The Fed stated that the Committee is strongly committed to returning inflation to the 2% goal, signifying it is not afraid to be hawkish until inflation falls. Chair Jerome Powell confirmed that recent readings regarding consumer inflation and inflation expectations caused committee members to realise a 75bp hike was necessary. Federal Open Market Committee (FOMC) meeting and statement: On 15 June, the Fed hiked the Fed funds rate by 75bp, to 1.50-1.75%, the first 75bp rate rise since November 1994.
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