The Market Reacted Negatively to Jeremy Powell’s CommentsDeltafx Admin 19 December 2022
The Federal Reserve, also known as the FOMC, is the central banking system of the United States and is responsible for guiding the monetary policy of the United States. Economic policy announcements and public statements by the Federal Reserve are among the most important economic events of the year because their impact on financial markets is far-reaching.
The Federal Reserve is responsible for buying and selling U.S. government bonds in financial markets and for setting interest rates and financial reserves. By definition, the Federal Reserve has two missions, Fed policymakers are expected to achieve stable prices and to maximize employment. Consequently, the public pronouncements of the Federal Reserve and its members are closely watched by traders, as even the smallest changes in monetary policy and the federal funds rate can trigger major market events.
The organization holds eight regularly scheduled meetings annually. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses risks associated with its long-term goals of price stability and sustainable economic growth.
The FOMC statement was released at 10:30 p.m. on Dec. 14.
However, Jeremy Powell’s words failed to convince the market. The market did not trust Powell and the FOMC that the Fed funds rate would be realistically high by the end of 2023. Meanwhile, only 5% of investors agreed with the market’s view. But by the end of 2023, only 4.35% of market investors expect interest rates to remain high through the end of 2023. Jerome Powell’s words had no impact on the market. Never before has the market so clearly ignored a message from the Federal Reserve Chairman.