Mr. Powell started with a new .5% rate hike, with multiple .5% rate hikes to come and that a future .75% rate hike is off the table. However he further stated that if higher rates were required the Federal Reserve would not hesitate to go there, so we can count on basically nothing. There will be a $47.5B balance sheet reduction occurring through August. Reduction of balance sheet will begin on June 1.
The Federal reserve will ramp up balance sheet reduction to $95B per month. Powell continued that inflation is much too high. We will see this month’s inflation rate in the next few days. Also mentioned, was that the 3.6% unemployment rate is lowest in 50 years and his guess was that job creation will slow. Wages are running high.
All 3 indexes were skyrocketing while Powell was speaking and stocks rallied. This morning, they began going the other way with the Dow down over 600 for instance. By end of day today it was down 1,063.09. It was mentioned that there is a good chance to have a soft landing. I personally would strap on a few pillows. They expect productivity to be high this year. Seems that no act of kindness shall go unpunished as companies beating earnings are still rewarded with lower stock prices. Today was an incredibly down day in the stock market.
Rates surprisingly have not moved much since the announcement. They were actually down slightly at today’s open and stayed that way throughout the day. That just points to the .5% rate hike already being priced in. With all the hikes planned going forward, rates at this level can’t last.
