In what has become a familiar pattern during several, post-FOMC meeting new conferences over the past year, seemingly dovish comments delivered by Federal Reserve Chairman Powell have served to loosen financial conditions and threaten to dampen the effects of the most aggressive monetary policy tightening in over forty years. To combat this very real risk, a parade of Fed policymakers typically hit the media with commensurately hawkish overtones to temper what they perceive as unduly bullish behavior in both stocks and bonds, commonly referred to as ‘clean-up on aisle five’ by many investors and market participants. Last week’s post-FOMC meeting routine was no different, with a number of policymakers reiterating that financial conditions should not be getting looser, that the Federal Reserve will continue to raise rates and has a ways to go before short-term rates are restrictive enough to get inflation on a clear path towards 2% and, most importantly, that the terminal Federal Funds rate will need to remain higher for a longer period of time than many investors expect.
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