In line with our expectations, Chairman Powell changed his tone on the rapid rise in long-term interest rates. He stated that the “speed of the rate rise was notable and caught my attention” but that the Fed “would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals”- which he has not observed.
He also tried to tamp down on the accelerated expectations for an increase in the policy rate. He did so by emphatically reaffirming the FOMC’s patient and dovish stance, which accords with their new policy framework.
Despite Powell’s efforts, the 10-year nominal yield rose 6 bps to 1.53% (as of this writing) following his comments. Some investors might have expected Powell to signal an imminent lengthening in the maturity of QE asset purchases. And Fed rate hike expectations eased only slightly.