Jerome Powell is a man of his word. And the financial markets believe that's an excellent trait for the Federal Reserve Chairman.
Powell told the financial markets to prepare for a 25 basis points increase in short-term rates in early February following the Federal Open Market Committee's (FOMC) March meeting. And that's what he delivered.
But despite his best efforts at transparency, the markets keep thinking, "maybe he will say something different this time."
The accompanying chart shows how stock market volatility increased in 2022 during Powell's press conference immediately following the FOMC's official meeting. This trend has continued into 2023.
At this point, I anticipate that the stock and the bond market in 2023 will continue to be volatile during Powell's press conferences. But I also would expect that Powell won't surprise markets.
Market volatility can test the most seasoned investor's mettle, which is why I follow Warren Buffett's advice and "don't watch the market (too) closely" around Fed meetings.
Fed Attempts to Calm Markets
March 29, 2023