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    The More Things Change… The More They Stay the Same.

    As anticipated, the FOMC rate decision was unchanged with the lower and upper bounds remaining at 5.25% - 5.50%. All eyes and ears were heavily focused upon the nuanced language of the release along with Chairman Powell’s responses during the Q&A. Any indication from Powell providing a hint of a dovish leaning, would arguably justify the markets’ bullish tone. 

    Notably, the Fed adjusted language in the release cautioning that it was not ready for a rate cut bias with the statement, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” Furthermore, he clearly stated that a March cut is not in the cards. Keep in mind that over the past month, the market had priced the odds of a rate cut as high as nearly 100%, down to 40% more recently. The markets have arguably performed some of the work on behalf of the Fed with a firm consensus since the October yield highs that the Fed was finished with a tightening of interest rate policy. Powell all but confirmed this bias in his presser today.

    We expect the market to continue to react positively, in terms of the direction of interest rates, to the Feds decidedly less-hawkish stance on policy guidance. Cyclical factors may offer some buying opportunity in the municipal market as we approach the April 15 tax deadline. I would suggest any chance to purchase bonds at more attractive levels than which are currently offered, should be considered a buying opportunity by investors. For perspective, interest rates (including municipals) are at the highest levels we have seen since 2010.

    Though recency bias of the October 5% yield high in 10Yr UST lingers in everyone’s mind; from a broader perspective, investors should not discount the chance to lock in today’s rates. In conclusion, absent any signs of a significant shock in terms of economic data, the Committee has indicated that interest rates have peaked and at some point, they will begin cutting rates. The only question is… when? We anticipate our client base to be decidedly active in seeking opportunities to put cash to work.

    Given Powell's directive regarding the March meeting, the May FOMC meeting is reasonably "in play" regarding the first potential rate cut. The Fed and the markets are very much in a data-driven mode. Powell was clear that he wants to see more significant and consistent signs of cooling before cutting.

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    Christopher Brigati

    Prior to joining SWBC, Brigati was Senior Vice President, Managing Director of Municipal Investments at Valley National Bank. With over 25 years of experience primarily in the municipal market, he is a recognized thought leader in the fixed-income markets and is a regular contributor with appearances on Bloomberg Television and Radio. He has authored numerous economic commentaries and his insights have been featured in leading financial media publications, including The Bond Buyer, The Wall Street Journal, and Bloomberg. Brigati has also been an active participant with the Bond Dealers of America (BDA) trade association, advocating regulators and legislators on Capitol Hill on behalf of the broker-dealer community. Before joining Valley National Bank, he served as Managing Director and Head of Municipal Trading at Advisors Asset Management, Inc. (AAM). Before that, he had a long career at Morgan Stanley where he served as Managing Director and Head of Wealth Management Municipal Trading for eight years. Brigati holds a bachelor’s degree from The State University of New York at Albany School of Business. He is registered for Series 3, 4, 7, 24, 53, and 63.

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