Fed Takes a Dovish Tone While Raising Rates

March 20, 2017

Fed Takes a Dovish Tone While Raising Rates Photo

As expected, the Federal Reserve (Fed) raised the Federal Funds rate by 25 basis points (bps) last week. The increase came with a dovish tone regarding the pace of future increases, and sent risk markets soaring and treasury yields lower following the announcement.

The market reaction among stocks will most likely have support in the coming weeks as low yields and an accommodative Fed have been and will continue to be good for equities. My expectation for bonds going forward is different, as a dovish Fed adds additional pressure to rising inflation expectations. Look for the yield curve to bearishly steepen, as we see long rates up in yield more than short rates.

There are very few key economic data releases scheduled this week, but the calendar has several Fed governors slated to speak. Pay close attention to these governors’ speeches, specifically watching for any deviation from Janet Yellen’s tone.

Tags: Monday Morning O'Malley | Bonds | Federal Reserve | Interest Rates | U.S. equities | Economic data

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