MBS pretty much flat – up 4 bps on the open. Stocks are same.

Federal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.

The Fed chief welcomed the slower price gains the US economy has achieved thanks to tighter monetary policy and further loosening of supply constraints after the pandemic.

However, he cautioned that the process “still has a long way to go, even with the more favorable recent readings.” At the same time, Powell suggested the Fed could hold rates

steady at its next meeting in September, as investors expect.

The Boston Fed President Susan Collins said “We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” Former Treasury Secretary Larry Summers urged continued hawkishness in an editorial in the Washington Post.

We got a new Atlanta Fed GDP Now estimate yesterday, with its model seeing 5.9% GDP growth in Q3. FWIW, this number simply seems wrong considering the other economic data we are seeing.

What a letdown, but also what an unsurprising speech from Fed Chair Powell.  He did the market a solid and threw in a mention of “R Star” and the inflation target, but not in a way that offered any new insight beyond anything shared at the last press conference. Markets had some positioning to work through in the wake of the speech, but the process was done by lunch with both MBS and Treasuries perfectly unchanged by the 1pm hour

MBS 5.5 closed up 9 bps.  Stocks were pretty much flat