PANews reported on April 7 that according to Jinshi, a top observer who closely follows the Fed's movements pointed out that Fed Chairman Powell quietly released a hawkish turn signal last Friday, and most market participants have not yet noticed it. Tim Duy, chief US economist at SGH Macro Advisors, expressed the above views when the federal funds futures market continued to heat up bets on the Fed's interest rate cut. According to the CME FedWatch tool, the market's expected probability of a rate cut in May has soared from 14% last week to 60%, and it is expected that the interest rate will fall to 3% by the end of the year.
The 2-year Treasury yield, which is most sensitive to monetary policy, fell 8 basis points to 3.59%. Duy pointed out: "We expected Powell to lean hawkish last Friday, but he went a step further when the stock market plummeted. The market may have ignored key signals - this is terrible." Powell introduced new wording in his statement on inflation expectations, emphasizing for the first time that long-term inflation expectations (not just one-year) are beginning to be worrying. More critical is the subtle change in forward guidance: he deleted two sentences in the March 7 statement that excluded the possibility of a rate hike - "If the economy remains strong but inflation does not continue to fall back to 2%, we will extend the policy restriction period; if the job market unexpectedly weakens or inflation falls beyond expectations, we will relax policy accordingly." Duy analyzed: "Although there is no explicit mention of rate hikes, the option of rate hikes is no longer explicitly ruled out. Powell knew that the market was in a free fall when he adjusted his wording. This is by no means slow, but deliberate."
