A Federal Reserve official said Monday that the market may have misunderstood the central bank’s intended message last week after stocks and bonds rose sharply.
The Federal Reserve voted last week to keep interest rates steady again, and its updated forecasts showed an expectation of three rate cuts in 2024. That sent stocks and bonds soaring, with the Dow Jones Industrial Average jumping to a record high.
“It’s not what you say, or what the president says. It’s what they heard, what they wanted to hear,” Chicago Fed President Austan Goolsbee said on CNBC’s “Squawk Box.” “I was confused – was the market just calculating, and this is what we want them to say?”
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The Dow Jones index hit a record high last week.
The Fed Chairman also disputed the idea that the Fed is actively planning a series of interest rate cuts.
“We are not discussing specific policies about the future. We are voting at this meeting,” he said.
Trading in the options market means traders see the most likely range for the Fed’s benchmark interest rate at the end of 2024 as 3.75% to 4.00%. CME FedWatch tool. That would be six-quarter-point cuts below the current federal funds rate, or double what was expected in the central bank’s summary of the economic outlook.
Goolsby did not explicitly say that the market pricing was wrong, but he did highlight this difference.
“Market expectations for the number of interest rate cuts are greater than September expectations,” Goolsby said.
Goolsbee wasn’t the only Fed official to downplay the importance of the meeting in the wake of the market rally. “We’re not really talking about interest rate cuts right now,” New York Fed President John Williams said on CNBC’s “Squawk Box” on Friday.
