Stocks Soar as Fed Signals More Caution on Rate Hikes Despite High Inflation
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Stocks and bonds rose sharply as Fed Chair Powell signaled a more dovish stance on interest rates despite high inflation. Cyclical stocks outperformed.
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The Fed kept rates unchanged at the latest meeting and lowered its forecast for future rate hikes, taking a more dovish tone.
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Powell said the Fed is still progressing towards its 2% inflation target over time despite the recent bumpy path.
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Markets are now pricing in a high chance of a rate cut in June or July, interpreting Powell as more sensitive to economic weakness than high inflation.
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Risk assets rallied on indication that recession odds have fallen given the Fed's lower hurdle to ease policy. But disappointments could still add market risk.