After today's hike, The Fed Funds rate has now increased by the largest amount since the six months ending March 1981, but all eyes will now be on Fed Chair Powell's rhetoric during the press conference - will he be as hawkish as Jackson Hole or dovishly temper the aggression with some data-dependent malarkey.
As BofA's rates strategy head Marc Cabana confirms: “Fed dot plot is hawkish. Fed is signaling a terminal rate of 4.6%, which the market has quickly repriced to. Importantly, the Fed is also signaling another 125bps of rate hikes this year, which the market expects to be 75bp in November and 50pb in December.
“We expect similar hawkish tone from the Powell press conference. Fed is set on lowering inflation and getting overnight rates into restrictive territory.”
Given that The Fed was clearly unhappy with the market's reaction to the July hike, the last thing The Fed wants here is to spark any financial conditions-easing hope, just as they have re-tightened from the summer 'Fed Pivot' surge...
Finally, will Powell address QT?
The dotplot today combined with what Powell will say confirms that Fed Funds rates are heading above 4% and will stay there for some time...
Sarah Hunt, chief market strategist at Alpine Saxon Woods, says that “the downgrade of economic projections is probably the ugliest part of this, especially when combined with a dot plot that says rates higher faster and longer.”
Watch the Fed press conference here (due to start at 1430ET):