![]() Indeed, it’s a loosening of financial conditions that’s seen trying Powell’s patience. Treasury yields “would rise, tech would drop and the dollar would rise after a message like that.” If not, then expect the tech and Treasury rally to continue and the dollar to get softer. ![]() If Powell sounds sufficiently hawkish, “financial conditions will tighten up quickly,” Torres said, in a phone interview. In Powell’s case, that would likely mean emphasizing that the labor market remains significantly out of balance, calling for a significant reduction in job openings that will require monetary policy to remain restrictive for a long period, Torres said. “Hawkish” is market lingo used to describe a central banker sounding tough on inflation and less worried about economic growth. How so? Look for Powell to be “unambiguously hawkish,” when he holds a news conference following the conclusion of the Fed’s two-day policy meeting on Wednesday, said Jose Torres, senior economist at Interactive Brokers, in a phone interview. They expect Powell to attempt to take them down a peg or two. To some market watchers, investors now appear way too big for their breeches. Treasury bonds have rallied, pulling down yields across the curve. Stock-market investors have also bought into the latter policy “pivot” scenario, fueling a January surge for beaten down technology and growth stocks, which are particularly interest rate-sensitive. Perhaps more galling to Fed officials, traders expect the central bank to deliver cuts by year-end. Fed-funds futures, however, show money-market traders aren’t fully convinced the rate will top 5%. Fed policy makers have steadily insisted that the fed-funds rate, now at 4.25% to 4.5%, must rise above 5% and, importantly, stay there as the central bank attempts to bring inflation back to its 2% target.
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