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MBS Day Ahead: Is The Fed's Surprise Announcement Actually Completely Logical?

Posted To: MBS Commentary

Yesterday was "interesting," to say the least. The Fed surprised markets with another unscheduled policy update and bonds traded accordingly. The surprise in question was an exceedingly well understood shift in the Fed's inflation framework. And I'm not just speaking generally. Here are a few newswires from the past year in which various Fed speakers lay out exactly what was ultimately announced yesterday: JUNE 5, 2019 – CHICAGO FED'S EVANS SAYS NEED TO DEFEND 2% SYMMETRIC INFLATION TARGET 'VERY STRONGLY'- BBG OCT 2, 2019 – FED'S WILLIAMS SAYS FED SEES 2% INFLATION GOAL AS A SYMMETRIC GOAL; LOOKING AHEAD THE GOAL IS TO HIT GOAL MOST OF THE TIME OCT 3, 2019 – FED’S CLARIDA SAYS IT’S IMPORTANT INFLATION BE ACHIEVED ON A SYMMETRIC BASIS AROUND 2% LEVEL…(read more)

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