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Liquidity Rising

Mar 24, 2023 • 8 Min Read

Dovish Fed Statement

On Wednesday, the Federal Reserve raised the target Fed Funds rate range by 25 basis points (BPS), marking the ninth increase in just over a year. The FOMC statement hinted at a nearing end to rate hikes by removing the reference to "ongoing increases."

According to the FOMC's updated forecast, there will be one more rate increase this year, and officials expect slower economic growth in 2023 compared to previous estimates. The market generally responded well to this information, with major equity indices and cryptoassets remaining mostly unchanged immediately after the report's release and throughout most of the press conference.

Source: @NickTimiraos

However, Treasury Secretary Yellen, while testifying before Congress, refused to provide assurances regarding insuring a greater percentage of deposits across the troubled banking sector. This happened towards the end of Powell's press conference and led to a significant sell-off in bank equities, which spilled over into broader risk assets.

Despite the volatility in asset prices following Yellen's statements, the key takeaway from the FOMC meeting is that both the statement and press conference were more dovish than markets had anticipated a month ago.

This dovishness is justified, as ba...

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