Yesterday, the Fed raised interest rates by .25 basis points, as the Fed did in February before the banking crisis. I speculated that a bank scare could cause the Fed to pivot, but this modest rate hike did not surprise me, as the CPI came in at 6% inflation for February, and there are signs of the Dollar’s value being eroded. This rate hike was also in light of treasury secretary, Janet Yellen’s, remarks that the U.S is “not considering ‘blanket insurance’ for bank deposits.” While stocks went down yesterday, in response to Yellen’s remarks on bank deposits and the rate hike, stocks rallied today, because Fed Chair Powell hinted at a pivot. These “Jack Nicholson” rallies show how much desperation and greed there is in the markets, as well as the copes to prop up this mega bubble. Especially taking into account the lack of trust and certainty in the Fed’s decisions and overall economic volatility.

Stock Market rallying in hope of a Fed Pivot

Powell flipflopped on rate hikes, from saying that “We do next expect to cut rates this year,” yesterday, and that he considered a pause in rate hikes but that the hike was supported by strong consensus, but also said that the “Process of getting inflation back down has a long way to go,” and that “It will be bumpy.” In regards to a soft landing, Powell said that “We’ll just have to see… I still believe that pathway exists [to a soft landing] and we are trying to find it.” Both Powell and Yellen have also been backtracking on insuring bank deposits. For instance, yesterday Yellen said that “We are no longer considering backstopping all deposits,” but the day before she said that “We are considering backstopping all deposits.” Today, Yellen did a total U-Turn in stating that “prepared for additional deposit action if warranted.” Yellen removed this language, while speaking to the Senate Subcommittee today, “As I said last week, the U.S. banking system is sound.” Powell also said that “Depositors should assume their deposits are safe,” which does not sound very reassuring.

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