Posted 2/1/2024, 3:02:00 PM
Markets Debate Risk of Fed Policy Mistake as Powell Rules Out March Rate Cut
- Markets sold off stocks and rallied bonds after Powell said no rate cut in March, seen as "bracing for a Fed policy mistake"
- Markets seem to think the Fed won't cut rates fast enough to prevent an economic downturn and loss of "soft landing" hopes
- This would be a policy mistake of leaving rates too high for too long as inflation cools and real rates rise
- Some strategists push back that credit spreads barely moved, questioning recession fears
- Stocks bounce back the next day though bond yields continue to fall, showing ongoing debate around policy mistake risk