{"id":438260,"date":"2026-09-17T15:00:15","date_gmt":"2026-09-17T08:00:15","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/was-the-fed-really-that-hawkish-or-the-market-just-overreacted-an-objective-overview-438260\/"},"modified":"2026-09-17T15:00:15","modified_gmt":"2026-09-17T08:00:15","slug":"was-the-fed-really-that-hawkish-or-the-market-just-overreacted-an-objective-overview","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/was-the-fed-really-that-hawkish-or-the-market-just-overreacted-an-objective-overview-438260\/","title":{"rendered":"Was the Fed really that hawkish or the market just overreacted? An objective overview"},"content":{"rendered":"
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The Fed raised rates by 25 bps as expected yesterday and signalled another rate hike by year-end. The market reaction was hawkish with stocks, bonds and gold falling and the US dollar rising. But was the outcome really that hawkish or the market just overreacted to nothing? Let’s see how it compared to the prevailing market pricing, consensus and past commentary.<\/p>\n

STATEMENT\u00a0<\/p>\n

The most notable changes in the statement were the vote split and the framing around inflation. The consensus was for one or two members dissenting in favour of a hold, but we got an unanimous decision. That could be read as slightly hawkish, but given the context and the credibility narrative, it’s not such a big deal.\u00a0<\/p>\n

In July, the Fed said that inflation remained elevated, in\u00a0part reflecting supply shocks that have driven price increases in certain sectors, including energy. Yesterday, they removed the supply shocks part. Again, it’s not a big deal because many Fed members in the past weeks argued that the current persistence\/breadth of inflation cannot be explained simply by the recent supply shocks. <\/p>\n

Even Fed’s Waller mentioned in July that\u00a0core inflation had begun rising before the oil shock and recently he said elevated energy prices and tariffs were no longer a significant source of ongoing inflation pressure.\u00a0<\/p>\n

Image: July and September FOMC statement comparison (h\/t newsquawk)<\/p>\n<\/p>\n

SUMMARY OF ECONOMIC PROJECTIONS AND DOT PLOT<\/p>\n

The macroeconomic projections were mostly in line with the consensus, as we saw a downward revision to unemployment given the recent trend in the labour market and an upward revision to inflation due to the persistenly higher energy prices and AI driven demand. The Fed also slightly upgraded growth projections, but there wasn’t a strong consensus on growth forecasts.\u00a0<\/p>\n

The focus was mainly on the dot plot, and this is where the Fed was less hawkish than expected. The consensus was for the Fed to signal one more rate hike in 2026 and one in 2027. The market, on the other hand, was pricing in one more in 2026 and two more in 2027.\u00a0<\/p>\n

The Fed met the 2026 consensus by projecting another rate hike, but missed entirely on 2027 where it just signalled rates to remain unchanged before rate cuts coming in 2028. The dot plot shows the committee bias and it clearly says that there isn’t much willingness to tighten enough. They didn’t even projected to erase the three rate cuts delivered in 2025.\u00a0<\/p>\n

Some said that the higher for longer stance in 2027 is hawkish. In reality, it doesn’t matter that much because the Fed is going to change that into rate cuts as soon as oil prices tumble or we get soft economic data. What matters is their bias and it’s not that hawkish.<\/p>\n<\/p>\n

PRESS CONFERENCE<\/p>\n

The press conference is where I got surprised by people saying that Fed Chair Warsh was more hawkish than expected. In my preview<\/a>, I mentioned that the consensus was for Warsh to mostly repeat his Jackson Hole speech. That’s exactly what he did.\u00a0<\/p>\n

You can compare his press conference remarks with the Jackson Hole speech and you will see that they are mostly the same. The only differences reflect the rate hike. For confirmation, you can ask ChatGPT to compare the speeches and it will tell you this:\u00a0<\/p>\n

“The second text (Jackson Hole) appears to be a substantial source\/template for the first text (press conference remarks), with several phrases, arguments, sequencing choices, and data points carried over almost directly. The first text, however, reframes the material as a September 16 FOMC press conference following a 25 bp rate hike, whereas the second is a Jackson Hole speech focused on monetary-policy principles and the economy”.<\/p>\n

CONCLUSION<\/p>\n

In summary, the Fed wasn’t more hawkish than expected, I’d argue it was less hawkish. If you are looking at the markets and seeing everything erasing yesterday’s moves, now you know why. The markets overreacted to nothing\u00a0and are now going back to pre-FOMC levels.\u00a0<\/p>\n

Looking ahead, I would carefully watch the situation in the Middle East as $100 oil, rate hikes and elevated bond yields might put more pressure on Trump to end his war. Look for signs of de-escalation as that’s going to weigh on oil prices. Oil has been the main driver of pretty much all other markets given its influence on inflation and interest rate expectations. Lower oil prices would trigger a dovish repricing and support risk sentiment. Of course the opposite is true if things escalate further.\u00a0<\/p>\n

Watch also the economic data. When the market pricing and expectations get overstretched, it doesn’t take much to see a strong reversal. If the data starts surprising to the downside and pointing to slowing economic activity, the aggressive rate hike bets will likely get pared back.\u00a0<\/p>\n

By the way, to show you that this is not an analysis done in hindsight, you can see below the screenshot of the chat we were having in the premium investinglive group<\/a>\u00a0during the FOMC decision and the press conference.\u00a0<\/p>\n<\/p>\n

This article was written by Giuseppe Dellamotta at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed raised rates by 25 bps as expected yesterday and signalled another rate hike by year-end. The market reaction was hawkish with stocks, bonds and gold falling and the US dollar…<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-438260","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/438260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=438260"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/438260\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=438260"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=438260"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=438260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}