With little expectation for a rate-hike today (66% chance of no change), market participants are scouring every word and nuance for signals that The Fed is more (or less) worried about inflation (PCE hit 2% on Monday) and may hike faster (or slower); and whether recent economic weakness is merely “transitory” or reflexively driven by The Fed’s tightening actually impacting financial conditions.
Bloomberg reports:
*FED KEEPS RATES UNCHANGED, SAYS INFLATION `MOVED CLOSE’ TO 2%
*FED SEES INFLATION RUNNING NEAR ‘SYMMETRIC’ GOAL MEDIUM TERM
Key Takeaways from FOMC lockup:
- Change in inflation language: `On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent’
- FOMC statement now twice uses the word `symmetric’ to describe its inflation objective, emphasizing they view a persistent overshoot the same way that they view a persistent undershoot
- `Risks to the economic outlook appear roughly balanced’
- No rate change, as expected, vote unanimous
- Interestingly, the sentence from the March statement about a strengthening economic outlook isn’t included in today’s statement
So it seems The Fed is hawkishly monitoring rising inflation and dovishly aware of a slowdown in the economy’s growth.
There is no press conference today.
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Expectations ahead of today’s FOMC statement show an almost even odds of 2 more or 3 more rate hikes in 2018…
Since The Fed hiked rates in March, stocks, bonds, and gold are lower as the dollar has soared 3%, oil is up almost 4% and 2Y yields are up 20bps…
US Macro data has disappointed consistently since The Fed hiked in December…
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