"Powell's Volcker Moment": Whatever The Fed Does On Wednesday Will Be A Mistake

A little over a week ago, when realizing the severity of the banking crisis spreading across the regional bank system (and which was about to jump the Atlantic and destroy one of the world's largest banks in a matter of hours), we said that "Powell is trapped: more hikes and CRE leads to tens of billions of incr. losses across banking system (AFS+HTM); small banks now reserve constrained guaranteeing something "breaks." Meanwhile inflation still hot."

Powell trapped: more hikes and CRE leads to tens of billions of incr. losses across banking system (AFS+HTM); small banks now reserve constrained guaranteeing something "breaks." Meanwhile inflation still hot. https://t.co/Nqm3R6RBw0

— zerohedge (@zerohedge) March 9, 2023

At that time, just ahead of another hot jobs and CPI report, consensus still expected the Fed to hike 50bps, but since then this view has been turned upside down and today the market is pricing in just around 3 cuts by January with the Fed hiking another 25bps at most (either in March or May) before pivoting lower.