Bassanese Bites: When Doves Talk – April 11 2022

Global Markets

It was all about the Fed again last week, as further hawkish commentary pushed U.S. bond yields higher and U.S. stocks lower. In what seemed a shock to many, longstanding policy dove Federal Reserve Governor, Lael Brainard, spoke of need to reduce the balance sheet “at a rapid pace” and possible “stronger action” if inflation remains uncomfortably high. This was followed by minutes to the recent Fed meeting which suggested the Fed would have raised rates by 0.5% last month were it not for sudden new uncertainties following Russia’s invasion of Ukraine. The minutes also signalled a likely balance sheet run down of around $US95 billion per month – almost twice as large as the $US50 billion per month during the 2017-19 rundown  – and beginning possibly as early following next month’s policy meeting.

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