Good morning from Singapore. It's Fed Day, the rate-setting Federal Open Market Committee is underway, and investors seem to be holding their breath as the meeting is expected to conclude with another 25-basis-point rate hike. But the big question is: Will this be the last?
Traders are pricing in an 87% chance of a rate hike, per the CME Group's FedWatch tool as of Asia's Wednesday afternoon — that's slightly lower than the 97% seen the day before. And according to The Wealth Alliance's CEO Rob Conzo, Fed Chairman Jerome Powell seems to be taking a page out of the playbook of Paul Volcker, a former Fed chair who was also tasked with tackling high inflation, in the 1980's.
Conzo says while Powell is expected to give small clues on the Fed's policy path forward — such as hint at whether there will be more rate hikes ahead — he's likely to stick to what he's been doing all along.
"His words that he used in past minutes were, 'We're going to keep at it.' That happened to be the name of Paul Volcker's autobiography: 'Keeping at It.' Jerome Powell is literally taking a page out of Paul Volcker's playbook," said Conzo.
There are other concerns on the horizon. The lack of progress in Washington on the debt ceiling is inducing anxiety among investors, with Treasury Secretary Janet Yellen warning the government could fail to meet its debt obligations as early as June 1.
As BlackRock's Chief Investment Officer of Global Fixed Income Rick Reider put it, "This is transitioning to the market's No. 1 focus across debt and equity, with a very intense focus on near-term T-bill maturities."
Despite the worrying outlook, there are signs the worst could be nearing an end. Core inflation in the euro zone slowed unexpectedly in April, albeit while still at high levels. There is growth in China and India — which combined the International Monetary Fund sees making up roughly half of the world's growth this year. We also heard from the Bank of Korea's governor — who said it's "premature" to talk about rate cuts just yet — but who added that global central banks are near the end of their tightening cycles.
