While the Fed held interest rates steady last week for the third consecutive meeting. At a press conference following the announcement, Fed Chair Jerome Powell announced, “We are likely at or near the peak rate for this cycle.”
All but three members of the central bank panel that sets monetary policy expect at least two rate cuts next year, according to economy projections released last Wednesday.
The news sent markets skyrocketing, with the Dow Jones Industrial Average topping 37,000 for the first time last Wednesday. The Dow continued to climb, adding around 252 points and closing at a record high on Tuesday.
The Dow dropped 475 points on Wednesday, however, snapping the market’s hot streak.
Some Fed officials have suggested the market is being overly optimistic.
Chicago Fed President Austan Goolsbee, a sitting member of the Fed’s rate-setting panel, said Monday that he was “confused” by the market reaction.
“It’s not what you say, or what the chair says. It’s what did they hear, and what did they want to hear,” Goolsbee told CNBC’s “Squawk Box.” “I was confused a bit with the, was the market just imputing, here’s what we want them to be saying?”
“I thought there seemed to be some confusion about how the [Federal Open Market Committee] even works,” he added. “We don’t debate specific policies, speculatively, about the future. We vote on that meeting. And we voted at that meeting not to raise rates.”
New York Fed President John Williams also told “Squawk Box” on Friday that the panel isn’t “really talking about rate cuts right now,” adding it was “premature” to consider future meeting decisions.
Futures markets are projecting Fed rate cuts starting in March and that the central bank will make deeper cuts than its estimates currently suggest.
“I think the market, in a way, is kind of reacting very strongly, maybe more strongly than what we’re showing in terms of our projections,” Williams said.
The Hill’s Julia Shapero has more here.
