As expected, the Federal Reserve (Fed) struck a more dovish tone coming out of last week’s Federal Open Market Committee (FOMC) meeting. The Fed’s post-meeting statement removed some key phrases, such as the need for “further gradual increase” in rates, and expressed the Fed’s desire to be “patient” as a result of “muted” inflationary pressure.
The Fed also mentioned its balance sheet normalization activities, stating that modifications to the current approach could be possible. Overall, the Fed was more dovish than expected, given changes in tone and the still solid economic performance of the economy. The January jobs report confirmed that employment was still strong, with the economy adding 304,000 new jobs. Taking into account these factors, I expect risk markets to continue to perform well in the coming weeks.
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