Communication from numerous Federal Reserve (Fed) officials last week signaled a 10th consecutive interest rate increase is likely to be delivered during its May meeting. Fixed-income markets are now pricing in a nearly 90% probability of a May rate hike — up from just 25% a month ago.1
The Fed’s resolve to bring inflation closer to its 2% target remains in place despite recent turmoil in the banking system and the prospect of tighter bank lending standards. Moody’s downgrade for 11 regional banks late Friday — partly resulting from deposit outflows — represents another sign of the strains emerging from the Fed’s aggressive monetary tightening.2
This week’s economic calendar will be highlighted by our initial read on first-quarter gross domestic product being released on Thursday and Personal Consumption Expenditures Price Index out Friday.3 Corporate earnings will also be in focus, with more than one-third of S&P 500 companies set to report this week, including the resurgent tech heavyweights Microsoft, Alphabet, Meta and Amazon.4
1Yahoo! Finance – TREASURIES-Yields hit four-week highs on British inflation, Fed expectations; 4/19/2023
2The Wall Street Journal – Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance; 4/22/2023
3MarketWatch – U.S. Economic Calendar; as of 4/24/2023
4Kiplinger – Kiplinger's Weekly Earnings Calendar (April 24-28); 4/24/2023
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