FOMC Rate Decision - 25 bps hike and Fed Funds Rate higher for longer in 2023 in significant departure from market pricing

 The Federal Reserve announced the FOMC Rate decision by hiking rates by 25 bps as was expected. 

Fed introduced a line regarding the current banking crisis assuring the markets of the resilience of the US banking sector

The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.

The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.

Interestingly , the projected path of monetary policy hasn't changed much 

The only significant revision to economic projections is in Year 2024 where GDP growth has been knocked off by 40 bps to 1.20% and the Year 2023 has seen a 20 bps hike in PCE inflation and 10 bps cut in GDP growth.

Immediate reaction has seen 2Y yields at 4.07% after having dipped as low as 3.96% post policy from prior policy highs of 4.17%. 

To me the policy is hawkish and in significant deviation from current pricing where Fed sees rates higher for longer in 2023 at 5.10% and the market priced Fed fund pricing as low as 3.88% two days back.