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Fed policy signals to trigger market reaction

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Βy Han Tan, Chief Market Analyst at Exinity Group

The uncertainty leading up to Wednesday’s FOMC meeting has gripped markets that are desperate to be vindicated about the Fed pivot narrative.

Confirmation that the aggressive front-loading of the Federal Reserve’s ongoing rate hike cycle are now out of the way could offer a further major boost to risk assets which have recently rebounded from the lows of the year, but have struggled to stage a sustained recovery.

The mere suggestion that the Fed is open to a downshift in rate rises at upcoming meetings may be enough to herald some more relief for equities, which have endured a bruising year so far.

However, risk appetite will wane once more should the Fed quash such misguided expectations over a dovish pivot, persisting instead with its hawkish stance in the battle against inflation.

 

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