However, as Fed rhetoric has taken a hawkish bent along with as the FOMC’s meeting date has drawn closer, the market has rethought the direction of monetary policy.
While the chance of the committee actually approving a half-point hike is actually remote to say the least — there hasn’t been an increase of which large since May 2000 — the latest trading action is actually telling in terms of expectations. A market of which had been pricing in a dovish Fed is actually today doing some adjusting.
“With the Fed seemingly all although on autopilot for a while, the bond market has some catching up to do as well,” Goldman Sachs economist David Mericle said in a note. “Investors have found a range of reasons This particular year to cost substantially fewer hikes than we along with the median FOMC participant anticipate … We have been skeptical of these arguments along with see recent Fed commentary as broadly supportive of our take. Markets have moved in This particular direction, although there is actually further to go.”
Indeed, the market has gravitated toward a more aggressive Fed.
Since the committee released minutes Aug. 22 through its most recent meeting, the yield on the benchmark 10-year Treasury note has risen a quarter point to its highest level since mid-May. Traders are assigning an 84 percent chance to another rate hike in December.
However, 2019 remains an open question. Fed Chairman Jerome Powell will hold a news conference when This particular week’s two-day meeting concludes Wednesday, so markets will be watching closely for any clues about the future.