The Federal Reserve today hiked rates by 0.5%, it’s largest hike since 2000. They also announced trimming their balance sheet by up to $95 billion a month starting next month.

All of that was basically baked in the cake by market participants. The real thing to watch was commentary on the path of future hikes.

And, today Fed Chair Jerome Powell told reporters that officials may do similar 0.5% increases in June and July, but they are not actively considering even larger hikes.

That’s news! In recent weeks, we heard chatter the Fed may act even more aggressively—like a 0.75% hike. So, with that extra forcefulness off the table for now, the equity markets cheered.

There was also buying in the bond markets with yields falling.

Ahh, a glimmer of certainty at a very uncertain time.

Powell, though, emphasized the path forward is very fluid—um, data dependent—so we still need to monitor future data points to see if the Fed can avoid getting more aggressive.

For investors wanting to see calmer markets, we need to get more clarity on this, as well as the war in Ukraine and China’s Covid lockdown policy.

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