Why Fed vs. markets showdown leaves Powell at disadvantage

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Call it the “Clash on Constitution Avenue.”

The Federal Reserve insists rates will rise above 5% and stay there for some time. Money markets see the Fed struggling to get rates above 5% and have priced in cuts by year-end, a view that has helped fuel a tech- and growth-led rally for stocks to begin 2023.

Read: The Fed and the stock market are on a collision course this week. What’s at stake.

That’s led to expectations that Chair Jerome Powell will use his news conference to forcefully push back against expectations for cuts this year, emphasizing that rates need to say elevated and that the inflation battle is far...

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