JPow Speaks - Due to inflation, the number of Fed Chair speeches in the past week have increased to 2. That's right, this wild 100% gain in speeches from JPow has roiled markets, but hey, at least we got an excuse to stare at his beautiful face again.
You know inflation is bad when it starts to leak into the number of Fed speeches we get. Only 5 days after blessing the world with his presence on Wednesday of last week, Powell took the mic once again to drop some bombs on markets.
And that's not a joke - literally the second JPow started to get into the plans of monetary policymakers, the S&P and other U.S. equity indexes took a turn for the red.
Despite markets reacting with a sense of drama that Shakespeare could only dream of, the story is largely unchanged. JPow's focus in his speech and Q&A centered around explaining just how ready and willing the Fed is to jack up rates quicker than expected. This was the sense that intuitive traders took from Wednesday's meeting, but Powell's confirmation of this sentiment weighed heavily yesterday.
Specifically, Chair Powell voiced things like "if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25bps at a a meeting or meetings, we will do so." The key word in there is meetings.
Before this speech, traders were largely of the belief that a 50bps move was on the table in May, but JPow's opening of the possibility for more than one 50bps hike in 2022 is not something we were mentally prepared for.
Additionally, JPow said some other particularly fear-mongering statements. When asked what would stop the Fed from a 50bps hike in May, Powell simply stated "nothing." He showed a willingness for the FOMC to enter a "restrictive" monetary policy environment, as opposed to finding the "neutral" level everyone was already freaking out about.
And lastly, Powell also dropped a nuke in expanding "to the extent that [the FOMC's view on the nature of inflation] continues to fall apart, my colleagues and I may well reach the conclusion that we'll need to move more quickly."
It wasn't exactly your typical Fed meeting. Since March 2020, JPow has been the king of bankrupting bears and perishing puts. Now, it looks like the tables have turned, with the Powell Pivot really just being a switch to "f*ck your calls." Watch out, bulls.