Rates Grind Lower as Fed Follows Through on Anticipated 0.50% Hike

Yields fall as Fed delivers well telegraphed 50bp hike. Treasurys ended an up and down session modestly lower on the day, the 10-year Treasury yield closing ~2bps lower while the front end of the curve was little changed in the aftermath of the Fed’s rate decision and press conference. In retrospect, today’s 50bp rate hike was expected and well-telegraphed by the Fed, making yesterday’s CPI print the main event of the week. Elsewhere, equities snapped a two-day rally after Fed Chair Jerome Powell’s press conference, the S&P 500 and NASDAQ losing 0.61% and 0.76%, respectively.

Fed raises benchmark rate by 50bps. The Fed raised their policy rate by 50bps to a new range of 4.25% – 4.50%, a step down from the 75bp hikes that we have seen at recent meetings. With the rate hike itself a foregone conclusion, the market focused on Fed Chair Jerome Powell’s comments this afternoon. Powell was generally hawkish throughout his press conference, saying that the Fed still has “some ways to go,” while adding that he does not “see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.” However, Powell did acknowledge that the Fed may be close to reaching the end of the tightening cycle, leaving investors split on the magnitude of the committee’s next rate hike in February.

Day ahead. Retail sales data will kick off the session at 8:30 AM ET. Industrial production and business inventories data will be released at 9:15 AM and 10 AM, respectively.