The Federal Reserve has indicated a shift towards a more dovish stance on monetary policy, reflected in recent comments from its members and the rise in the 10-year Treasury yield, according to information released on Monday. The general and futures markets are anticipating a halt in rate hikes at the final Federal Open Market Committee (FOMC) meetings of the year.
This dovish transition is further supported by a significant decrease in JPMorgan (NYSE:JPM)'s Hawk-Dove index, which gauges the sentiment of the Fed towards changes in monetary policy. The shift comes after an aggressive tightening campaign by the Fed that saw benchmark rates climb from nearly 0% in March 2022 to around 5.25%-5.5% currently.
Several Fed members including Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly, and Philadelphia Fed President Patrick Harker have made comments suggesting a lessened urgency for an increase in the Fed funds rate. Their remarks underscore the central bank's reduced necessity for further interest rate hikes.
The spike in the 10-year Treasury yield also points towards this shift in stance. The yield, which moves inversely to price, has seen a notable increase, indicating expectations of reduced borrowing costs and slower economic growth.
The market's anticipation of a halt in rate hikes at forthcoming FOMC meetings aligns with this new dovish outlook. This development signifies a potential change in the trajectory of US monetary policy as we approach the end of 2023.
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