Another set of hawkish comments from two FED members Williams and Bullard caused some moves in the market in the evening. USD dollar strengthened, while US equities deepened downward move.
Fed's Bullard:
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The markets are underpricing the risk that the FOMC may be more aggressive.
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The Fed will have to continue raising interest rates until 2023.
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The FOMC must reach the low end of the 5%-7% rate range.
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We will have to maintain sufficiently high rates throughout 2023 and 2024.
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Everything will go better if we reach the restrictive level sooner, making 2023 a year of disinflation.
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The first 250 basis points of tightening were just getting to neutral.
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The labour markets remain extremely strong and its response to inflation is not as strong as many people believe.
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A recession is not inevitable.
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Estimates for fourth-quarter US GDP are positive.
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Continues to believe that growth will be below trend in 2023.
Fed's Williams:
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Inflation remains far too high and will take time to fall.
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The Fed has more work to do to reduce inflation.
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The unemployment rate in the United States is expected to rise from 3.7% to 4.5%-5.0% by late 2023.
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More interest rate increases will aid in the restoration of economic balance.
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Noticed signs of moderating inflation amid supply chain improvement.
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Inflation is expected to fall to 5.0%-5.5% by the end of 2022 and 3.0%-3.5% by late 2023.
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The job market remains remarkably tight, with strong hiring and wage gains, while inflation expectations remain stable
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The Fed's outlook is dependent on the data.
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Economists do a bad at forecasting recessions.
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There are several downside risks to the forecast.
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The baseline forecast does not predict a recession for the US.
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Fed could reduce rates in 2024.
US500 failed to break above 200 SMA (red line) last week, and today's index returned below psychological 4000 pts level following Bullard and Williams comments. Source: xStation5
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