Federal Reserve likely to disappoint policy doves: strategist GlobeInvestor
Dovish investors are going to be disappointed by the Federal Reserve’s policy-setting open market committee who are meeting now and should hedge against policy outcomes likely to rattle global markets, Weeden & Co. derivatives strategist Michael Purves said on Tuesday.
Purves told the Reuters Global Markets Forum chatroom that expectations for interest-rate levels between policymakers and markets were extraordinarily wide. That gap carried the biggest risks of losses for investors betting the Fed will soon resume rate cuts and balance-sheet policies in place since 2008’s financial crisis, Purves said. The Fed will issue its decision and an accompanying statement on Wednesday.Question: What do you expect to hear from the Federal Reserve on Wednesday?
Answer: Most agree that we will see the Fed lower its rate-hike expectations and give some comforting language on the balance sheet. But my question is whether the will be skewed for the hawks or the doves? if the Fed lowered by two hikes from December, that would still be north of where the market is. So, to deliver a net dovish message, the Fed must really deliver two hikes lower than December, a strong message on the balance sheet. ...It seems a big ask.
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