A rate hike of 0.25% was expected. But markets tanked after the Fed announcement because there was a lot in Fed Chairman Powell’s comments that suggested the Fed is not done yet despite a global banking crisis. We should expect at least one more rate hike of 0.25% on May 3, 2023.
Powell made a number of comments to confirm that another rate hike is on the table. He said, “Without price stability, the economy does not work for anyone.” He also said, “Labour markets remain extremely tight” and that “Inflation projections continue to remain high.” To emphasize these points, Powell said that getting inflation under control will be “bumpy.”
But Powell also changed his narrative from “ongoing hikes” to “some policy firming may be appropriate.” The wording change from plural “hikes” to a singular “firming” is a signal that the Fed may be done raising rates after the May FOMC meeting. But Powell later said, “If we need to raise rates higher we will” thus keeping his options open. When asked if a “soft landing” was still possible, Powell said, “It’s too early to say. We’ll just have to see.”
That sounds more like a hard landing to me.