Prepare for the Powell pivot?
The Federal Reserve chair needs to reassure the market that this may be the last rate hike for awhile
The Federal Reserve is going to raise rates one more time at 2pm EST today. That is pretty much a given. But what about the Fed’s next meeting on June 14?
Investors are expecting a pause. (The CME FedWatch tool currently shows a more than 80% probability that rates will be in a range of 5% to 5.25% in June….which is where they will be later this afternoon if the Fed raises rates a quarter-point as expected.)
That’s why today’s Fed press conference is crucial. Fed chair Jerome Powell needs to clip his hawk wings and start flapping like a dove instead. Remember that there are no economic projections or dot plot coming out today. So investors will be reacting entirely to what’s in the Fed statement and what Powell says at the 2:30 presser.
Yes, the labor market remains relatively robust. (Says the guy who was laid off earlier this year ironically enough.) ADP’S private sector employment report that came out Wednesday morning showed that 296,000 jobs were added last month.
But the Fed’s series of rate hikes will eventually cool the job market. So if Powell continues to sound more alarm bells about inflation and not express enough concern about the recent raft of bank failures and other economic worries, it could be a painful final hour and a half of trading today.