Fed’s Powell to Double Down on Hawkish Message to Markets (Double Shot Of Rate Hikes … No Sugar Tonight?) Cryptos Rise, Commodities Down

Confounded Interest ^ | 06/22/2023 | Anthony B. Sanders

[Kaiser8408a]

Fed’s Powell to double down of hawish rate message. Or banks and consumers can expect no sugar tonight.

Expect a hawkish Fed Chairman Jerome Powell to double down on the Fed’s commitment to vanquish inflation at his semiannual testimony before Congress on June 21-22. While the immediate audience will be lawmakers, the message will be aimed at markets, which remain unconvinced the Fed will hike by another 50 basis points, as indicated in the dot plot from the June FOMC meeting. Powell may raise his hawkish tone to push back against such views.

Even as Powell is putting on a hawkish performance, confirmation hearings for World Bank Executive Director Adriana Kugler — as well as to extend Fed Governor Lisa Cook’s term — could reinforce the dovish faction on the Fed, somewhat diluting Powell’s message.

The updated dot plot from the June FOMC meeting shows a majority of FOMC participants anticipate at least 50 bps more of rate hikes this year. Markets aren’t convinced – as of the time of writing, futures point to a 74% chance of rate hike in July and only a 10% chance of an additional rate hike in 2023. Powell’s main task at the testimony will be to convince markets that officials stand behind the dot plot and anticipate multiple hikes.

Bottom line: The hearings present an opportunity for Powell to bring market pricing in line with what has been put forth in the FOMC’s Summary of Economic Projections. We are doubtful that he will succeed.

The most recent Fed dots plot suggests rate declines in future years.

Cryptos are up this morning.

Commodities are down this AM.

So, like in the film Blue Velvet, we have the choice between Michelob or Pabst Blue Ribbon. Powell is choosing …. PBR!!

[Kaiser8408a]

Biden is like an organized crime boss from "Blue Velvet."

[wardamneagle]

Only reason for the recent pause is because we are in an election cycle.