Fed doves on the edge: fly or nigh | MarketTalk: What’s up today? | Swissquote

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US headline inflation fell to 3.1% on a yearly basis as expected, but headline inflation was slightly higher-than-expected on a monthly basis. And that small uptick has raised suspicions that the Federal Reserve's (Fed) final stretch in combating inflation may be more challenging than anticipated.
The latter triggered a mini selloff in the 2-year bond right after the data, yet the selloff didn’t last long. The US 2-year yield is about where it was yesterday morning.
With the latest inflation report behind us with minimal fanfare, the Fed officials will lightheartedly keep interest rates steady this month. Economic forecasts and the dot plot will play a crucial role in providing insight into the perspectives of Federal Reserve officials regarding expectations for rate cuts.
We will probably face a satisfied, calm but cautious Powell, who will say that the Fed has done a great job fighting inflation, but that the rates will remain restrictive as long as needed. One dovish tweak could be deleting ‘additional policy firming’ from the post-meeting communication.
In the best-case scenario, the doves will make a mountain out of the smallest dovish details that could justify a further fall in yields. In a more down-to-earth scenario, Powell will contain market optimism and rectify the rate cut bets. If so, we should see correction and consolidation in bond and stock valuations during the final weeks of the year.
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