FOMC Hints at Hiking Slowdown

Yields down on potential hiking pause. Swap rates and Treasury yields declined across the long end of the curve today following the Fed’s 25bp hike and hints of a hiking pause. The yield curve bull steepened throughout the trading session, with the 2-year UST yield falling ~16bps to ~3.80% and the 10-year down ~9bps to ~3.34%. Equity markets echoed a similar risk-off tone, with the S&P down ~0.70% and the NASDAQ down ~0.46%. 

Hiking pause may be on the horizon, but explicit statement was absent from FOMC. The FOMC’s unanimous vote for a 25bp hike today is being viewed by many as topping-off the most aggressive hiking cycle since the 1980s. Driving the hopes was the removal of a line from last month’s statement saying that the committee “anticipates that some additional policy firming may be appropriate.” Still, Powell emphasized that the committee would continue to be data driven at upcoming meetings. Speaking on the current banking crisis, Powell said bank conditions have “broadly improved”, but noted that tighter credit conditions are likely to have an uncertain effect on economic activity, hiring and inflation. A comparison of today’s Fed statement vs. March’s meeting can be read here.

Day ahead. Tomorrow’s relatively quiet schedule of data releases includes Initial Jobless Claims and Trade Balance data.