On the May FOMC

A 50 bp hike, as fully expected. But Powell had to back away from recent excessive hawkishness, and he did. This is what we were looking for to put a bottom in for stocks. He confirmed that additional 50 bp rate hikes are on the table, but that 75 bp hikes hadn’t even been discussed. This is confirmed by no dissent from Bullard. The written statement acknowledged weaker growth, and risks from China’s lockdowns, a recognition that the fullest hawkish approach is not appropriate. Asset sales will begin in June, but with a dovish surprise – run-off will begin at only half-speed, with the full caps not coming into effect for three months. Powell conceded that if inflation visibly decelerates, anticipated 50 bp hikes would become 25 bp hikes.