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"...Fed Chair Jay Powell insisted that the rate must still go higher, albeit at a slower pace than last year, to vanquish inflation. He won’t think about halting rate hikes yet, let alone entertain the notion of when the Fed might actually start cutting rates from their highest levels in more than 15 years.
“It would be very premature to declare victory,” he said.
Yet the financial markets have priced in the start of rate cuts by fall, and based on the market action Wednesday afternoon, Mr. Powell’s tough talk did nothing to dissuade them. Not only do the markets not share the Fed’s caution about declaring success in reversing inflation, they’ve moved past it to the next battle – against an impending recession.
And it seems the more markets are willing to talk about the timing of rate cuts, the more central bank leaders are pushing back with their “hey, not so fast” rhetoric. . . READ MORE
After mirroring rate hikes, the U.S. Fed and Bank of Canada are now diverging
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U.S. Federal Reserve Chair Jerome Powell says the rate must still go higher, albeit at a slower pace than last year, to vanquish inflation.JONATHAN ERNST/Reuters
As interest rates approach their peak, an intriguing stand-off has emerged between North America’s major central banks and financial markets.
The U.S. Federal Reserve and Bank of Canada seem determined not to allow their gaze to drift to the future. The financial markets are already there. And each seems increasingly determined to sway the thinking of the other.
The difference of viewpoint was apparent in the Fed’s rate announcement and news conference Wednesday, as the bank raised its policy rate by another quarter of a percentage point, to a range of 4.5 per cent to 4.75 per cent.
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