Clash Of The Titans!

“We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”- Jerome Powell, December 14th, 2022.

As I wrote: “Tug-Of-War” post the last Fed rate action in November, it was evident that markets were spooked by the Fed’s inaction last year and were dictating the terms through 2022. However, in November, Powell desired more from the markets and bond markets quickly obliged him by repricing the terminal rate higher and cheering Powell’s intent to knock down the inflation monster.

Nonetheless, the “Clash of the Titans” took an astounding turn this week. In a replay of the November episode, the Fed sounded as hawkish as ever this week as a stunning 17 out of the 19 members voted for a 5.21% terminal rate, but t…