Business

Authored by Jim Quinn via The Burning Platform blog,

Despite the warning by "some" Fed members that stocks are "quite high", and another even more implicit warning, that the Fed may have to revise its forecast if "financial markets were to experience a significant correction", the market's initial reaction to the Fed's warning was to ignore it, although in recent minutes there has been a modest acceleration to the downside across equity markets...

... while bonds initially sold off in a kneejerk reaction to the Fed's balance sheet reduction warning, only to recoup some of the losses.

As previewed, the focus on the just released Fed minutes was on two things: the path of the rate hike, which the Fed said it can change its assessment if warranted, and on the future of the Fed's balance sheet, where the FOMC said said a reinvestment shift was warranted, suggesting that a balance sheet reduction would likely begin later this year.

With the March FOMC Minutes due out shortly, here are the key items to focus on, courtesy of RanSquawk which reminds us that at the March meeting, the FOMC decided to hike rates by 25bps, the third hike of the tightening cycle, taking the rate to 0.75%-1.00%. Although the Fed signalled further tightening this year, markets had expected the Fed to indicate four hikes in 2017, however, the median stayed at three and market expectations for four or more hikes declined.

With stocks blasting off the moment today's stellar ADP report hit (even if subsequent PMI and ISM soft data roundly refuted the highest surge in private payrolls in over two years), pushed higher by the momentum ignition in USDJPY, some traders have declared today the day the reflation trade has (again) come back.