Brian Chappatta, Columnist

The Fed Clears Bond Traders’ Lofty Dovish Hurdle

Central bankers delight markets and remove all pretense of a 2019 rate increase.

March 20, 2019 at 7:17 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Jerome Powell snubs his options.
Photographer: Andrew Harrer/Bloomberg

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Bond traders had set a towering bar for the Federal Reserve to surprise them and ignite a rally. Chairman Jerome Powell and his fellow central bankers had no problem clearing it on Wednesday.

The median projection of Fed officials dropped to zero interest-rate increases in 2019, compared with two hikes in their December forecasts. Historical precedent set a high hurdle for that sort of rapid Fed adjustment. Since the dot plot began in 2012, only in March 2015 and March 2016 did policy makers drop their median “dot” for the same calendar year by 50 basis points (or two full moves) relative to the previous quarter’s meeting. In both previous cases, exogenous shocks prompted the reversal. By contrast, the S&P 500 Index this week reached its highest intraday level since October, while crude oil climbed above $60 a barrel on Wednesday for the first time since November. For the most part, all is well.