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Hawkish Or Dovish, Its "Dovishly" Hawkish
Week Ending June 18th, 2021
Fed's meeting was main attraction last week. Most of the market participants were hoping for some sort of change in Fed' s dot plot heading into the meeting in view of the new inflation signs. And Fed did make a change to dot plot by projecting 2 rate hikes in 2023.
The 10 year US Treasury yield touched almost 1.60% before the Fed's release of statement. And then it started falling and eventually settled below 1.45% on Friday. The 2 and 3 year treasury yields rose a little while 30 year Yield fell 20 basis points approximately after Wednesday.
Much awaited FOMC meeting has added more to the growing expectations among market participants that Fed will fall behind the curve, in my view. Most of the news headlines are calling it some kind of hawkish statement by the Fed, but I think it is still on the dovish side of hawkish spectrum. As there is no mention of any taper or “pause” in bond buying and no mention of any taper timeline projections etc., although Fed has raised the inflation and GDP projections leaving Unemployment expectations unchanged. Moreover the projected rate hikes are almost 2 years away.
But at-least Fed has pulled forward the projected rate hikes. In my view there is greater probability in the near future that these rate hikes will be further pulled forward. I think Fed’s maximum employment mandate should be re visited by Fed as benefits, stimulus checks and changing family dynamics due to the pandemic will keep many out of the labor force by choice.
I hope for more hawkish statements from Fed going forward as taper timeline has to be discovered soon in view of the evolving situation in terms of new projections and new data-points. I also think sometimes that may be we are watching a great experiment by Fed in an effort to return to old normal by intentionally falling behind the curve.
In the end I must say, we all must understand that we are dealing with very complex subject and it is very risky business to forecast inflation, unemployment, interest rates and other factor .
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By Jaspreet Singh PaddaWeek Ending June 18th, 2021
Fed's meeting was main attraction last week. Most of the market participants were hoping for some sort of change in Fed' s dot plot heading into the meeting in view of the new inflation signs. And Fed did make a change to dot plot by projecting 2 rate hikes in 2023.
The 10 year US Treasury yield touched almost 1.60% before the Fed's release of statement. And then it started falling and eventually settled below 1.45% on Friday. The 2 and 3 year treasury yields rose a little while 30 year Yield fell 20 basis points approximately after Wednesday.
Much awaited FOMC meeting has added more to the growing expectations among market participants that Fed will fall behind the curve, in my view. Most of the news headlines are calling it some kind of hawkish statement by the Fed, but I think it is still on the dovish side of hawkish spectrum. As there is no mention of any taper or “pause” in bond buying and no mention of any taper timeline projections etc., although Fed has raised the inflation and GDP projections leaving Unemployment expectations unchanged. Moreover the projected rate hikes are almost 2 years away.
But at-least Fed has pulled forward the projected rate hikes. In my view there is greater probability in the near future that these rate hikes will be further pulled forward. I think Fed’s maximum employment mandate should be re visited by Fed as benefits, stimulus checks and changing family dynamics due to the pandemic will keep many out of the labor force by choice.
I hope for more hawkish statements from Fed going forward as taper timeline has to be discovered soon in view of the evolving situation in terms of new projections and new data-points. I also think sometimes that may be we are watching a great experiment by Fed in an effort to return to old normal by intentionally falling behind the curve.
In the end I must say, we all must understand that we are dealing with very complex subject and it is very risky business to forecast inflation, unemployment, interest rates and other factor .