Good Thursday AM,

Bonds rallied hard yesterday (a welcome event), after markets digested both the Fed announcement and commentary from the subsequent press conference hearing that The Fed may not raise rates again. Equities and crypto went on sale (albeit for different reasons). All three (bonds, equities and crypto) are having a good day today, which is good to see. The 10-yr sits at 3.45% and we need to break and close below 3.40% for some additional and substantial price improvement. Despite Mr. Powell claiming that all deposits are safe, separately, Treasury Secretary Yellen says treasury isn’t considering guaranteeing all bank deposits. More on this as it becomes available/necessary. I will say any more shocks to the banking system will push rates down quickly.

Including a few snippets below for some flavor on the Fed meeting and what’s on the horizon. 

Fed Raises Rates but Nods to Greater Uncertainty

The Federal Reserve approved another quarter-percentage-point interest-rate increase but signaled that banking-system turmoil might end its rate-rise campaign sooner than seemed likely two weeks ago. The decision Wednesday marked the Fed’s ninth consecutive rate increase aimed at battling inflation over the past year. It will bring its benchmark federal-funds rate to a range between 4.75% and 5%, the highest level since September 2007, Nick Timiraos reports.

Fed Chair Jerome Powell said officials had considered skipping a rate hike after banking stress intensified last week. And he hinted that Wednesday’s increase could be their last one for now, depending on the extent of any lending pullback that follows a bank run earlier this month. New projections showed almost all 18 officials who participated in the meeting expect the fed-funds rate to rise to at least 5.1%, implying one more quarter-point increase and no rate cuts this year.

Fed Walks Tightrope Between Inflation and Financial Instability

The Federal Reserve is responsible for the financial system and the macroeconomy. In theory, these are different jobs calling for different tools. The Fed is trying to stay faithful to that separation of roles. On Wednesday, it continued its campaign to slow the economy and bring down too-high inflation, with a quarter-percentage-point increase in interest rates and a forecast of one more. Meanwhile, though, it has been lending generously to banks through its discount window to contain the damage caused by the failure of Silicon Valley Bank two weeks ago. In reality, the two jobs aren’t so easily separated.

“Events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects, and therefore too soon to tell how monetary policy should respond.”

Please remain safe and stay healthy, make today great!