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It’s a subtle shift but enough to get markets excited as equities rallied hard, with the Nasdaq seeing its best day in over 2 years in a 4% rally. While risk assets soared, the dollar stumbled but are we actually getting that close to a pivot by the Fed?

Let’s try and dissect the quotes from Powell yesterday. On the neutral rate, he made mention that:

„We would move expeditiously to get to the range of neutral and I think we’ve done that now.. we’re at 2.25% to 2.50% and that is right in the range of neutral.”

„Now that we’re at neutral, at some point it would be appropriate to slow down. We’ve been frontloading these very large interest rate increases and now we’re getting close to where we need to be. But we haven’t made a decision on that.”

That is pretty much the first key step in the inflation battle i.e. getting to neutral. The bases are now loaded and the Fed needs to seal the deal with a home run. There is going to be more rate hikes to follow, so one must not get too hasty in anticipating that the Fed is going to be sending a different message any time soon.

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