From Forward Guidance To Market Guidance: Warsh's Reflexive Wrecking Ball?

From Forward Guidance To Market Guidance: Warsh's Reflexive Wrecking Ball? Authored by Nohshad Shah, Citadel Securities EMEA Head of Fixed Income, The Fed sounds hawkish... but markets are testing the reaction function Chair Warsh was unequivocal that there is “no soft inflation target”, that five-plus years of above-target inflation cannot be cured by nine weeks of better data, and that this Fed “will not waver”. Yet despite that language…and three members preferring an immediate hike…the FOMC again declined to move. Warsh instead repeatedly highlighted the large rise in nominal and real Treasury yields since June,...