Powell Tries Hard to Hide His Dovish Side

The clearest takeaway from the Federal Open Market Committee today: The committee does not want to cut, and it wants to hold rates higher for longer.

Between the committee barely putting together the dots to get one more quarter-point rate hike this year, and a press conference that seemed like Fed Chair Jerome Powell had to contain himself from sounding dovish, we may have moved from “high hurdle to hike” to “extremely high hurdle to hike.”

Yes, the Fed is data dependent, and maybe it is wishful thinking on my part, but the Fed seems to be looking to the data for reasons to do nothing. Powell certainly wasn’t hawkish.

The Fed is always “data dependent,” but it often seems to have had a bias. Until early this summer, the FOMC seemed to be looking for excuses to hike. I just don’t see that in the language or the actions today. Remember, Powell comes into this with an objective of not coming across as dovish, so anything less than brutally hawkish is probably an admission of neutrality.

So far, Treasury yields are getting more inverted across the curve as the front end sells off a bit (pricing in higher for longer), but the back end is rallying a bit, given it is an FOMC day and we are near the high yields of the year (depending on where you look on the curve) the movements are quite muted.

Similar for equities.

Maybe equities need to price in higher for longer, but I think we should be pricing in “boring” for the next few meetings, unless data across the board is very good or very bad.

That should be good for bonds and risk assets here. I’m buying this recent dip in stocks.

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