Hawkish and restless: new Fed’s announcements

News of the day, Wednesday, April 6

Yesterday, Fed’s governor Lael Brainard said that the Federal Reserve will tighten monetary policy at “a rapid pace”. While Brainard usually favors loose policy with low rates, her announcements on Tuesday were quite hawkish, as she promised that “The [Federal Open Market] Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted”. The Fed approved the first rate hike in three years in March, and it is unlikely to be the last one this year. Furthermore, the market expects the Fed to cut down nearly $9 trillion in assets, mainly Treasuries and mortgage-backed securities, on its balance sheet.

“The [FOMC] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” — Lael Brainard said.

The price of Brent crude is $107.40, WTI — $102.80, GBP/USD — 1.3103, EUR/USD — 1.0911, and gold costs $1929.00 per ounce.