At last night’s
At last night’s
Brien says the market got it right yesterday, and the rally didn’t have anything to do with interest rates being left unchanged. The Fed upgraded its view of the economy by sounding much more relaxed on inflation than analysts expected. And because they came out more dovish than hawkish, the market was led higher, he says, although he does believe the Fed’s statement changes yesterday were more subtle than what would typically move the markets 100+ points.
It was their generally upgraded assessment of the economy, East agrees, that led to the spike in the markets. He says it isn’t a case of over-analysis because for the Fed to publicly recognize improved inflation data, however slightly, is notable cause for a rally. What the minutes from the meeting indicate, according to East, is that inflation has tentatively moderated, and – agreeing with Brien – that was a bit more dovish than people expected.
Both analysts believe inflation is going to come down eventually. Brien thinks the inflation bias inherent in the Fed will continue and it doesn’t preclude the central bank from cutting rates if the economy begins to worsen. East says the Fed’s inflation bias will likely turn to a neutral bias for the next 3 or 4 meetings, and then he expects a rate cut in the third quarter.
So there you have it – a prediction for next fall’s Fed meeting. Indeed, the craft of interpreting “Fedspeak” will likely continue just as long as there is a Federal Reserve to analyze and a market to move.