1-2 November FOMC meeting: debating a downshift, not a pivot

As widely expected, on 2 November, the Federal Reserve hiked the Federal Funds rate by 75bp, to 3.75-4.00%. The action marked the fourth consecutive 75bp rate hike this year. Investors initially interpreted the accompanying statement as dovish by selling the dollar and buying US Treasuries and equities. 

However, any question as to whether the Fed is beginning to alter its stance of monetary policy was corrected by Powell’s hawkish press conference. Consequently, investor sentiment reversed quickly during Chair Powell’s press conference, where he made a striking comment that incoming data (inflation and labour market) since the September meeting suggests that the ultimate level of interest rates will be higher than previously expected. The pace of future rate hikes remains data-dependent, and Chair Powell confirmed the FOMC’s commitment to lowering inflation.

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