NN Investment Partners: Fed cements its dovish pivot
NN Investment Partners: Fed cements its dovish pivot
In yesterday’s meeting, the Federal Reserve cemented the dovish pivot established in January, according to Willem Verhagen, Senior Economist Multi-Asset at NN Investment Partners (NN IP). In his latest commentary, Willem Verhagen elaborates on the neutral stance and the dovish side of expectations:
“Fed Chair Powell clearly signaled that the Fed believes the economy is in a benign equilibrium with underlying growth slowing towards potential, the policy rate in the neutral zone and the unemployment rate a bit below its long-run value to help inflation to move a bit higher. The neutral bias on rates is now backed up by a dot plot that shows that the vast majority of the Federal Open Market Committee expects to remain on hold this year. What’s more, balance sheet roll-off will end in September and the Fed will start reducing the pace in May. This is pretty much on the dovish side of expectations. Because balance sheet reduction is also a form of tightening, this further reinforces the Fed’s signaled desire for a neutral policy stance. The big question for markets is how long this neutral stance will be maintained.”