Hedgeye Macro analyst Ryan Ricci is back to analyze another Jerome Powell press conference, which might be most remembered for the Fed Chair implying that his team of economists had no faith in their forecasts.
At first glance, Powell’s latest presser looked like a snoozefest. Rates unchanged. Balance sheet tapering slowed, not stopped. But underneath the calm, the Fed just took one big step closer to reaccelerating the quad 4 environment: slowing growth and falling inflation.
In classic Powell fashion, the commentary was loaded with “high uncertainty” while signaling subtle yet critical shifts. The real story? The Fed is backing off its $2T balance sheet reduction—removing a major source of market pressure. Yields are already reacting, and if they keep falling, bonds may rip higher.
Federal layoffs are spiking—almost exclusively among government employees. Add that to the stall in government spending growth, a sharp pullback in immigration, and tepid consumer activity, and you’ve got a recipe for a material slowdown in inflation and growth.
Why does this matter? The Treasury is staring down $5.3 trillion in maturing debt. Lower yields = cheaper refinancing. It’s a pressure cooker, and the Fed knows it.
Watch all of Ryan's Fed commentaries and his show Hedgeye NexGen for FREE on HedgeyeTV.com.
