The Fed sounds hawkish... but markets are testing the reaction function...
US central bank chair remains confident that sweeping reforms will win over key investors
Warsh cuts Fed forward guidance; markets independently price economic data, driving Treasury yields to 2007 highs. For tech managers, reduced policy clarity complicates capex and startup valuations; market demands risk premium until next employment report signals Fed intent.
In recent years, emerging markets absorbed the increased risk appetite that the Federal Reserve’s volatility-reducing forward guidance had created.
Federal Reserve Chair Kevin Warsh is changing the central banks communication approach, reducing reliance on forward guidance and leaving markets to interpret economic data more…