Powell's High-Stakes Market Bet
Federal Reserve Chair Jerome Powell is making a massive high-stakes bet with financial markets this Wednesday.
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The options? 1) Stick to the hawkish 25 basis point cut script to keep inflation in check as most economists advise. 2) Opt for a more dovish 50+ basis point blast to get ahead of the rapidly deteriorating economic backdrop, as traders are pricing.
There are major market ramifications for whichever path Powell selects. The hawkish 25 basis point call could overtighten financial conditions versus dovish repricing, detonating the 2024 uptrend. But going too dovish with 50+ basis points raises credibility risks after signaling higher terminal rates.
It's a high-stakes wager for Powell that's liable to dictate the near-term market trajectory through year-end. Too hawkish could catalyze an ultra-violent "sell the reality" retrenchment across asset classes. Too dovish could foment excessive dovish repricing and volatility just ahead of the midterms.
Circle Sept. 18 - Powell's call is a binary bet for massive upside or searing downside across markets.
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In March 2022, the Federal Reserve raised interest rates for the first time in five years.
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Now, according to the man whom CNBC nicknamed 'The Prophet'...
The Fed's next move is about to have a similar ripple effect on ordinary folks across America