Macro Trader

Market To Fed: We Don’t Believe Your Forecasts.

Boom! There we go: Stocks in the black now.

Bottom-line: 미국 국채 10년물 수익률은 점도표 발표 이후 상승했던 몫을 기자회견 동안 다시 하락하여 만회함. 중앙은행의 경로와 달리 시장 참여자는 여전히 내년 금리인하 가능성을 찾고 있음. The 10-year Treasury yield is now lower on the session and below 3.5%. The market has been erasing dot plot losses since Powell began the Q&A, and bond sentiment is once more challenging the Fed’s hawkish tone and looking for rate cuts before the end of 2023.

Implication: 인플레이션 목표치에 도달하여 머무르기 전까지 금리인하는 없을 것이라 다시 한 번 강조함. Asked about market pricing of cuts at the end of 2023, Powell reiterates that they’re not focused on cuts and that the committee won’t do so until its confident that inflation is moving down to 2% in a sustained way.

Powell: 내년도 금리인하에 대한 질문에 대해 그럴 일은 없다고 답변함. “It’s not on rate cuts.”

Here’s the change in the Overnight Index Swap market’s projection for the path of the upper bound from pre-CPI (yellow) to pre-Fed (blue) to partially retrace now back to purple post-Fed.

Powell: 중앙은행 위원들의 금리전망에는 어제 발표 된 물가 또한 반영한 것이라고 함. The SEP reflects data that comes out during the meeting. The November CPI data came out yesterday, on the first day of the FOMC’s meeting. Powell indicates that participant forecasts reflect that data.

Powell: 인플레이션이 완화되는데 대한 확신이 없으므로, 데이터에 여전히 의존할 것임. 때문에 다음 금리인상폭이 25bp일지 50bp일지에 대해 당장 이야기할 수 없음. Powell says “we’ll make the February decision based on the incoming data.” So, no guidance on whether to go by 50 or 25 in February. The Fed needs to be confident inflation is coming down in a sustained way.

Powell: 중앙은행이 다시 한 번 최종정책금리를 올리진 않을 것이라 장담할 수 없음. Powell says that he can’t say with confidence that the FOMC won’t again move up the peak terminal rate forecast at the next SEP release, which will be in March.

Powell: 아직 중앙은행이 해야 할 일은 여전히 남아있음. “We will stay the course until the job is done.”

Implication: “We don’t want to see stocks rally, guys!” Powell notes that financial conditions “fluctuate.” But it’s important that they reflect the policy moves the Fed is putting in place to address inflation.

Powell: 장기간 높은 물가가 지속 될 경우 물가에 대한 기대 또한 높은 상태에 머무를 위험이 있음. The longer that high inflation remains, the greater the danger that will become “entrenched” in inflation expectation.

Powell: 또한, 인플레이션이 진정되고 있다는 확신을 위해서는 더 많은 데이터가 필요함. Inflation data for October and November show a welcome reduction, but it will take more evidence to give confidence that inflation is on a downward path.

Powell: 노동시장은 여전히 과열된 상태에 있음. “The labor market remains extremely tight.”

Powell: 아직 더 할일이 많이 남아있음. “We’ve covered a lot of ground and the full effects of our tightening so far are yet to be felt, even so we have more work to do.”

Implication: 11월 성명문은 온화했지만, 기자회견은 강경했음. 반대로 이번에 성명문은 강경했으므로, 결국 기자회견을 지켜보도록 아직 잠들지 말 것. So, at the November meeting we had a dovish interpretation of the statement and then a pretty hawkish press conference. Today we’ve had a hawkish statement. We’ll see what the press conference holds!

Bottom-line: 새롭게 제시 된 경제전망은 기본적으로 중앙은행이 내년도 경기침체를 예상하고 있음을 암시함. 실업률 1% 포인트 상승과 2~3개 분기 성장률 수축은 파월이 기대하는 연착륙과 달리 경기침체에 해당함. Looking at the median forecasts for economic growth and the jobless rate, Fed policymakers are basically predicting a recession. A 0.5% gain for GDP in the fourth quarter of next year compared with the current quarter could easily incorporate two or three quarters of contraction. And the jobless rate rising by almost 1 percentage point -- that’s an outlook that is pretty consistent with a recession. So Powell may say they’re still hoping for a softish landing. But basically the Fed is projecting a recession.

implication: 내년 금리인하를 할 수도 있다는 기대를 지움. Recall that in September, the median was just barely at 4.6 for 2023. This move in the consensus is good news for Powell, and will likely dispel some concerns about some more dovish members of the FOMC potentially calling for cuts to start next year.