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What I expect from the FED tomorrow:
I don't expect much change in the Statement. Some say there will be changes on the pace of QT. Can be, CPI & PPI inflation doesn't seem to be tamed yet. On the other hand FED's favourite inflation gauge, PCE, doesn't look too bad.
My main focus will be on the Press Conference. Powell will keep saying the rate cuts shouldn't be taken for granted & they are data dependant. However it's the questions that matter, not the answer. It's always the narrative that drives the markets.
+"Will you keep rates higher for longer?"
- "We will be data dependant"
market will take this as "dovish".
+"Will there be rate cuts in 2024?"
- "We will be data dependant"
market will take this as "hawkish".
In developed economies, central bankers avoid making harsh, bold statements. So that they make sure they keep the markets stable and avoid big changes in the currency values overnight. The media, press and reporters found a way around this. Sending markets in their desired direction by tweaking the questions. They want a hawkish reaction? Ask a dovish question. Want a dovish reaction? Ask a hawkish question. It's smart, and it's better to react rather than predict.
What I expect from the FED tomorrow:
I don't expect much change in the Statement. Some say there will be changes on the pace of QT. Can be, CPI & PPI inflation doesn't seem to be tamed yet. On the other hand FED's favourite inflation gauge, PCE, doesn't look too bad.
My main focus will be on the Press Conference. Powell will keep saying the rate cuts shouldn't be taken for granted & they are data dependant. However it's the questions that matter, not the answer. It's always the narrative that drives the markets.
+"Will you keep rates higher for longer?"
- "We will be data dependant"
market will take this as "dovish".
+"Will there be rate cuts in 2024?"
- "We will be data dependant"
market will take this as "hawkish".
In developed economies, central bankers avoid making harsh, bold statements. So that they make sure they keep the markets stable and avoid big changes in the currency values overnight. The media, press and reporters found a way around this. Sending markets in their desired direction by tweaking the questions. They want a hawkish reaction? Ask a dovish question. Want a dovish reaction? Ask a hawkish question. It's smart, and it's better to react rather than predict.
I make my own luck.
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