Federal Reserve officials said Monday that markets may have misunderstood the central bank’s intended message after stocks and bonds soared last week.
The Fed decided to keep rates on hold again last week, with its latest forecast showing three rate cuts expected in 2024. This pushed stocks and bonds higher, pushing the Dow Jones Industrial Average to an all-time high.
Chicago Fed President Austan Goolsby said on CNBC’s “Squawk Box” that “the issue is not what the chairman said or what the chairman said. It’s what they heard and what they wanted to hear.” . “I was a little confused. Is the market just imposing what we want to say?”
See chart…
Last week, the Dow hit an all-time high.
He also pushed back against the idea that the Fed is actively planning a series of rate cuts.
“We do not discuss specific policies speculatively about the future. We vote at the meeting,” he said.
Trading in the options market suggests traders see the most likely range for the Fed’s benchmark interest rate at the end of 2024 as 3.75% to 4.00%, the paper said. CME FedWatch Tools. That would be six quarter points below the current federal funds rate, or twice the level expected in the central bank’s economic outlook summary.
Mr. Goolsby did not explicitly say that the market pricing was wrong, but he emphasized the difference.
“The market’s expectations for the number of rate cuts are greater than the SEP’s expectations,” Goolsby said.
Mr. Goldsby was not the only Fed official to downplay the meeting in the wake of the market rally. “We’re not really talking about rate cuts at this point,” New York Fed President Williams said Friday on CNBC’s “Squawk Box.”
