Morgan Stanley IM: This Week’s Fed Meeting: What Words will Move Markets?
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.
01.02.2023 | 06:13 Uhr
As the Fed nears the end of its tightening cycle communication is critical, as words can move markets, but mistakes can be made.
WSJ journalist and Fed “mouthpiece” Nick Timiraos last Sunday
signaled the Fed’s intention to slow the pace of rate hikes to 25 basis
points this upcoming Wednesday.
This Sunday however he indicated that this does not imply the Fed is
stopping here, instead that the terminal rate is still under debate and
may yet end up in the 5.0 - 5.5% range.
The Fed is likely debating “top-down” factors like unemployment and
output, arguing about whether demand is still too high and more hiking
is needed to cool the economy.
But the Fed may also be assessing “bottom-up” data focused on
falling wages, layoffs and weak GDP components including retail sales,
auto and housing, which may ultimately lead them to end the hiking cycle
sooner rather than later.
All in all, we will be listening closely to the Fed this Wednesday.
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