Rates as of 0500 GMT

Market Recap

The Fed did as expected it hiked the fed funds rate by 50 bps and announced that it will begin to run down its balance sheet in June. The statement and the press conference conveyed the Committees urgency around taming inflation, Fed Chair Powell indicated that they are not planning yet on going full Volcker and hiking extremely aggressively. As a result, risk assets performed well, with AUD surging and the US stock market rallying.

The Committee is highly attentive to inflation risks, the statement said, while Powell said in the press conference that Inflation is much too high and we understand the hardship it is causing, and were moving expeditiously to bring it back down.

Expeditiously is a code word for 50 bps hikes. Powell said 50 bps increases were on the table for the next couple of meetings and suggested that officials could then resume hiking by 25 bps from September if price pressures showed signs of cooling. He reassured markets that the Committee is not actively considering a 75 bps hike, as one or two more hawkish members have been advocating.

These comments were less aggressive than many people had feared. There was some concern that he would pull a Draghi and say that the Fed would do whatever it takes to get inflation under control. It appears that the Committee wanted to signal its more moderate plans to the market to remove some uncertainty and prevent market expectations from running away.

On the other hand,…