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The Weekly Wrap - March 25, 2022

While nothing has substantively changed between the FOMC meeting and this week’s conference, other Fed officials seconded Powell’s more hawkish rhetoric. Their motivation is anyone’s guess, but the next FOMC meeting is not until May 3-4, leaving plenty of time for bubbling oil and commodity prices, stoked by the war in Ukraine and China’s swift lockdown response to another wave of Covid, to un-anchor inflation expectations. The message apparently got through to traders; the 2-year Treasury yield – which is highly sensitive to policy expectations – has spiked by 30 basis points since Powell’s speech on Monday. That said, if Powell also wanted to curb the demand-boosting wealth effect from a surging stock market, his words had little effect, as stock prices continued to advance this week.