Fed: Slower pace of monetary tightening? – Westpac

Analysts at Westpac explain that the US equity markets like the fact that the Fed Chairman Powell appears open to a slower pace of monetary tightening.

Key Quotes

“Powell’s comment that the benchmark funds rate is “just below the broad range of estimates of the level that would be neutral for the economy” was enough to spark a strong bounce in US equities, while the 10 year yield briefly dipped below 3% for the first time since mid-September.”

“Westpac is forecasting rates will rise in December, and this will be followed by 3 further rate hikes in 2019. However, market pricing implies that while the Fed is likely to hike in December (about 80% priced), it will move only once in 2019.”

“Attention now turns to the G20 meeting in Buenos Aires this weekend. Expectations are high that presidents Trump and Xi will emerge with some sort of agreement on trade from a private dinner scheduled for Saturday evening. However, recent commentary  from the US administration has been very unsupportive for this view.”