Lombard Odier Says Markets Are Repricing Fed Credibility and Independence

Lombard Odier macro head Florian Ielpo said market moves reflected a repricing of the U.S. Federal Reserve’s credibility and independence. According to Jin10, Ielpo said inflation had clearly returned to the center of the Fed’s reaction function and that “someone is steering” policy in that direction. He said this reinforced a “higher for longer” environment for real interest rates. Ielpo added that the Fed had “adjusted its tone,” with messaging that was more concise and more directive, and no longer emphasized dissent. He said much of the wording from previous statements had been dropped, which he described as a “small monetary policy revolution.”