Recent market declines have left investors in sombre mood, but US central bankers are celebrating. Well, not celebrating, but they’re certainly not displeased.
Minneapolis Fed president Neel Kashkari last week said he was “actually happy” after markets reacted with alarm to Federal Reserve chairman Jerome Powell’s hawkish speech at Jackson Hole, saying investors now realised the Fed was serious about reining in inflation.
Mr Powell made sure to use the word “pain” during that speech, emphasising he is willing to administer tough medicine. That message was reiterated by New York Fed president John Williams, who said rates would likely remain at restrictive levels through 2023.
Investors have taken note. Market prices indicate a 75 per cent chance of another 0.75 percentage point hike later this month. A 0.5 percentage point hike is expected in November. Smaller hikes are expected in December and May 2023, which would see rates topping 4 per cent.
‘Is that your wife? You should be ashamed’: a charity collector’s anti-immigrant hate in south Dublin
Local history: From William Orr and the not-so-united Irishmen to a box of underwear labelled ‘ass sizes’
Here are 33 places to eat in Ireland that readers say are good value
David Coote has made a fool of himself – but worse, he’s undermined referees
For years, investors bought into the idea of a Fed put, the belief the Fed would run to the rescue in the event of a market sell-off. Not any longer – not with a Fed that is, as Ritholtz Wealth Management’s Ben Carlson notes, “openly rooting for tighter financial conditions and lower stock prices”.