Kicking The Can Down The Road

The Federal Reserve kept interest rates unchanged at 4.25%-4.5%, with most officials expecting two rate cuts this year but a more hawkish stance overall.

Daily Updates:

• Yesterday evening, the FOMC voted unanimously to leave the benchmark federal funds rate unchanged, for the fourth time this year, at 4.25%-4.5%. That was a move priced in by markets with a 99.9% probability – therefore pushing the focus of yesterday’s meeting on the revised Summary of Economic Projections (SEP) and Chair Powell’s presser.

• The SEP’s ‘dot plot’, which outlines future interest rate moves according to the views of the 19 officials on the committee, was largely unchanged from March’s outlook with both plots suggesting that the median official still sees the Fed cutting rates twice this year (by a total of 50 basis points). 

• More crucially, however, the distribution of those dots was markedly different to March, and certainly more hawkish: 7 FOMC participants see no rate cuts before the year-end – that’s up from 4 members in March. 8 members see 2 rate cuts, down from the 9 members in March. Throughout his press conference however, Chair Powell was sure to make clear that “with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction”.