Credit conditions are tightening, in part because the Fed has decided to raise rates. Also, economic prospects are deteriorating outside of the Fed decisions in response to war and pandemic. Makes the Fed’s job of calibrating its reaction function - yet undefined - harder.
https://twitter.com/lisaabramowicz1/status/1503650630145126403
This is a good time to remember that participants in the #FOMC meeting submitted their forecasts on economy, rate hikes and what the terminal rate should be, before the meeting. @federalreserve Powell will provide import context for how discussion shifted during meeting.
Expect more caution on wide range on uncertainty due China closures and war. The Fed consensus going into meeting was that pandemic and variants more inflationary that destructive to demand. Labor market held up through Omicron wave, although wages slowed.
Discussions about when & how to shrink the Fed’s mammoth balance sheet also will likely occur. We need to start getting more guidance on how that discussion is shaping up. We were expecting the Fed to announce reductions in bloated balance sheet by June.
Powell will not want to lay out hard decision rules given the uncertainty we face on so many fronts, which means we are likely left with few actual trigger points. Fed-induced slowdown easier to emerge from than a credit market seizure - 2008-09 proved that.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
