Mid-week market update: Coming into the December FOMC decision, I was worried that the market might react negatively on the prospect of a hawkish rate cut. Ahead of the meeting, the Committee was highly divided and the potential for a divided decision was extremely high.
As it turns out, the level of hawkishness had already been priced in. There were only three dissents on the quarter-point rate cut decision. One was for a half-point cut (Miran), and two not to cut, which was a lower degree of hawkish dissent than expected. Moreover, the dots in the dot plot wasn't that different compared to September.
As well, the Fed announced a "QE but not really QE" operation of purchasing mainly T-Bills to facilitate an ample level of banking liquidity. We can argue whether really represents another round of quantitative easing, but the net effect is to inject liquidity into the financial system, which creates a tailwind for asset prices.
The full post can be found here.
No comments:
Post a Comment