A hawkish pause, but don't panic

Mid-week market update: It was a hawkish pause. The Fed’s decided to leave rates unchanged, but in the Summary of Economic Projections (SEP), it acknowledged that the economy is strong than its June projections. More importantly, the Fed Funds target for the end of this year remains unchanged, indicating that FOMC members expect another quarter-point rate hike, and raised rate expectations by a half-point for the next two years. In other words, higher for longer.
 

Moreover, the 2-year Treasury yield, which is a market proxy of the terminal Fed Funds rate, ended the day at 5.16%, a new cycle high.

 

Risk-off!

The full post can be found here.