TechFlow, April 7 — According to Jinshi Data, a top analyst closely tracking the Federal Reserve signaled that Chair Powell quietly delivered a hawkish pivot last Friday, a move most market participants have yet to notice. Tim Duy, Chief U.S. Economist at SGH Macro Advisors, made the comments as federal funds futures continue to price in aggressive rate cuts. CME FedWatch data shows the market’s probability of a May cut has surged from 14% last week to 60%, with expectations for rates to fall to 3% by year-end.
The yield on the two-year Treasury, most sensitive to monetary policy, dropped 8 basis points to 3.59%. Duy stated: “We expected Powell to lean hawkish last Friday, but he went further amid the stock market plunge—markets may have missed a critical signal, and that’s scary.” Powell introduced new language regarding inflation expectations, emphasizing for the first time that long-term inflation expectations (not just one-year measures) are becoming concerning. More crucially, there was a subtle shift in forward guidance: he removed two sentences from the March 7 statement that previously ruled out rate hikes—“If the economy remains strong but inflation does not sustainably return to 2%, we will extend the period of restrictive policy; if the labor market weakens unexpectedly or inflation falls faster than expected, we will ease policy accordingly.” Duy commented: “While rate hikes weren’t explicitly mentioned, the door is no longer clearly shut. Powell adjusted his wording fully aware the market is in free fall—this wasn’t clumsy, it was deliberate.”
