Goldman’s Hatzius Warns Opaque Fed Signals Could Jolt Markets as Traders Price 45% Odds of 1 Hike
Updated
Updated · Business Insider · Aug 21
Goldman’s Hatzius Warns Opaque Fed Signals Could Jolt Markets as Traders Price 45% Odds of 1 Hike
2 articles · Updated · Business Insider · Aug 21
Summary
Jan Hatzius said the Fed’s new practice of withholding forward guidance will make rate-decision swings “more random,” raising volatility around upcoming policy meetings.
Kevin Warsh’s rationale is to stop markets from fixating on Fed intentions and reveal views on inflation, but Hatzius argued traders will still guess the next move—just with worse information.
That uncertainty is already elevated: Bank of America called positioning before the last Fed meeting unusually uncertain, while CME FedWatch shows markets pricing a 45% chance of one more hike and 20% for two.
Hatzius said the risk could worsen if officials keep offering informal rate hints in interviews while centralized communication fades, creating a broader “cacophony” across the Fed.