GDP growth for 2022 was revised from 2.8% to 1.7%, and such a rate is expected for 2023.
Among the potentially positive things for the markets is the assurance that yesterday’s move was exceptional and that FOMC intends to hike by another 50-points at the end of the July meeting.
It is also essential for markets to understand where the Fed intends to stand. Average forecasts from FOMC members suggest a level of 3.75%, which is 200 points above the current rate and 150 points below the peak that the futures market set up for the day before.
Despite the reassurances of Powell, the markets can hardly go through a period of 50-point hikes at a time with quantitative easing without losses, which is tightening financial conditions on both sides.
The rally in the Dollar and the decline in equity prices in response to such policies could bring the final point of fiscal tightening closer. Still, in the coming days or weeks, markets have a high chance of adjusting to the new reality.
