The Fed: We Need to Talk About 2s
Final FOMC thoughts.
This weekend I wrote about how the 2-year US Treasury note yield’s behavior heading into the July 2022 and February 2023 FOMC meetings was a key tell that FED Chair Powell was likely to be dovish. Using those two meetings as a template, my thesis for this week’s press conference was that if 2s started falling early this week that was likely a sign that Powell would lean dovish, perhaps by openly and glowingly cheering the prospect of a soft landing and all but declaring victory over inflation as so many market participants have done on his behalf in the wake of the last CPI report.
Outside of a rather hawkish title and subtitle, to me this morning’s Nick Timiraos FOMC preview read as “decidedly neutral”, but former FED Vice Chair Roger Ferguson’s interview this morning on CNBC helped break the tie.