Fed may be done raising rates: Nick Timiraos

News over the weekend that the Bank of Japan may raise rates as soon as the end of the year has triggered a gap lower in JPY pairs. Some of them have already closed the gap, but the mayhem produced at the start of the trading week overshadowed one other important piece of news, this time coming from the United States.

An article in the Wall Street Journal written over the weekend by Nick Timiraos suggested that the Fed may be done raising rates. It implies that the Fed is on track to make an important shift in its monetary policy.

It is important to note that Nick Timiraos is the one journalist the Fed used to leak information to test markets. In the past, everything Nick wrote about the next Fed’s move turned out to be accurate and market-moving.

So what did Nick Timiraos write this time, and why did the markets not move?

Nick Timiraos suggests that the Fed may not raise rates anymore

Nick makes three essential points in the article that traders cannot afford to ignore. First, the Fed will pause in September.

The decision is only due next week, and there is plenty of time until then. Even if market participants leaned towards a pause, the article confirms that the Fed will not hike in September.

Second, the article suggests that the reason for the Fed to pause is that inflation shows signs of rapid decline. This is a critical piece of information to consider in light of the August CPI data due tomorrow.

Third, and perhaps the most critical point, is that the Fed will have a hard look at the upcoming data to consider whether more hikes are needed or not. This is something new, given that the markets priced in one more rate hike in 2023.

So why did the markets not move?

They did move if we consider the reaction to the Bank of Japan’s Governor interview over the weekend. We only do not know if that move was also in reaction to Timiraos’ article.

Summing up, both events over the weekend could have moved the markets on their own. Traders will find out which one is already priced in tomorrow after the inflation report is out.