MARKET UPDATE: The Fed Shifts Tone

Rates were slightly better this week, but the main change was the Fed’s shift in tone on future rate hikes.

ANALYSIS

Following the (horrifying) weekend events in Israel, rates improved quite a bit early in the week. This was due to concerns of a wider war breaking out and hitting the world economy. However, Wednesday’s inflation report showed up a bit hotter than expected (3.7%.) resulting in rates losing about 2/3rds of their early week gains.

Against this backdrop, we say quite a few Federal Reserve members come out with statements that were much less hawkish on future rate rises. This is a major shift. Previously, they were keeping their options open for more rate bumps, but that appears to have passed. This change in tone is not a small deal.

WHAT’S NEXT

Next Thursday is the day to watch. Jobless claims, existing home sales, and the Fed Chair speaking could move markets significantly.