Bonds Hear Dovish Message in Powell’s Comments on Disinflation
- Fed chair not bothered by looser financial conditions
- Swaps traders anticipate half-point drop in rates from peak
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Treasuries rallied Wednesday, with most yields falling at least 10 basis points, as investors ran with the view that economic conditions are likely to keep the Federal Reserve from delivering on the additional rate increases policy makers still anticipate.
Yields reached their lows of the day shortly after Fed Chair Jerome Powell began his press conference confirming that the disinflation process had started. Earlier the central bank announced its eighth consecutive rate increase, to a range of 4.5% to 4.75%, and committed to more rate hikes. Still, bond market-watchers characterized Powell’s overall message as dovish even as he reiterated that the policy rate probably will need to rise further to bring about lower inflation.