Fed Leaves Rates Unchanged as Expected, Dot Plot of Future Policy Splits

-edited

The dot plot of future expectations has split into two camps: Those who expect the status quo and those who see cuts.

The Wall Street Journal reports Fed Holds Rates Steady, Hints at Possible Cut if Outlook Dims.

While the central bank’s rate-setting committee expected the economy’s expansion to continue, “uncertainties about this outlook have increased,” it said in a statement. “In light of these uncertainties and muted inflation pressures, the committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”

Nine of 10 members of the rate-setting committee voted to maintain the federal-funds rate in a range between 2.25% and 2.5%. St. Louis Fed President James Bullard dissented in favor of lowering rates, the first dissent since Fed Chairman Jerome Powell took lead of the central bank in February 2018.

Press Release

Here is the entire Press Release of the FOMC decision.

What Changed?

The above is from the WSJ Statement Tracker.

Reaction

There is not much of a reaction so far in the stock markets or bond markets.

The yield on the 10-year note declined a basis point to 2.046%, holding above the 2% mark for now but the next poor economic report will likely turn that into a one-handle.

For all of today's heightened anticipation, the results were quite anticlimactic.

Mike "Mish" Shedlock

Comments (20)
No. 1-15
JonSellers
JonSellers

No way the Fed could increase rates with the 10 year heading south. Holding steady is the right thing to do. Wall Street seems to be okay with it for the moment.

bradw2k
bradw2k

We are uncertain but still hoping that the stock market expansion gets going again. If it's down at our next meeting, we'll do our thing.

Gasmire
Gasmire

More like if Trump is reelected we'll start doing our thing.

Greggg
Greggg

The US slide to ZIRP/NIRP has begun.

LawrenceBird
LawrenceBird
  1. lower rates does not cure Trump trade policy
  2. zero rates had no effect on inflation rate
  3. bridge to sell if anyone believes cpi or deflator measures inflation
  4. is unemployment rate also a fake number? why the concern when at historic low?
  5. real rates by govt measures are barely over 0
  6. federal goverment less able to survive rates over 2.5% than corp america

Fed might as well let Trump or any other president set the rate; they are no longer independent so why the chirade?

AshH
AshH

Surprised I haven't seen an angry Trump tweetstorm on this yet, or an announcement that Powell has been replaced by Bullard.

thimk
thimk

if the ensuing months don't produce a rate cut, Trump and the markets will be apoplectic (word of the day ). feds are between a rock and a hard place . t-notes sales are brisk and we are funding rather nicely at current rates .

truthseeker
truthseeker

2 year note at 174 down 13 just now ok I’ll hit submit once more to see what happens

lol
lol

Fed gonna need moar printing presses...…...lots of em,the mother of all QE scams getting ready to drop...….can it save the Trump govt from Amerika is now collapse?America is now Greece x 1250!!!

Seb
Seb

What if the central banks fucked up not with monetary policy but with gold policy? Hear me out. IF Crypto/Bitcoin is a real and existential threat to fiat and the original plan was to use gold suppression as a technique to keep the public valuing fiat over gold while the CB’s held gold, would the CB’s prefer the gold market to explode over crypto market exploding because central banks control the gold market and not the crypto market? Would central banks allow and actually support gold appreciation as a shot to hopefully suppress crypto and keep the dream for themselves alive?

CautiousObserver
CautiousObserver

@Seb: "would the CB’s prefer the gold market to explode over crypto market exploding because central banks control the gold market and not the crypto market?"

CB's do not care about crypto, yet. If and when they do care about crypto, they will get their respective governments to wipe out all unsanctioned versions through an act of law.

Meanwhile this evening, after today's Fed announcement, the price of gold is popping above $1350 like a champagne cork. Gold has not successfully breached that level in 6 years. It will be informative to see if that price jump is allowed to continue.

Calling all Fed governors...Calling all Fed governors...The gold market thinks you have no backbone and that your "low inflation" view of monetary policy is a joke. You better smash it down quick.

Snow_Dog
Snow_Dog

If gold had the power to do the things alluded to, why hasn’t it done so by now? $1300 /Oz gold was appropriate when debt was at the 14-15 trillion level, not the runaway freight train of debt we’re witnessing now at 22 trillion.

The gold cavalry is not coming over the horizon to save the day. Powell knows the village must be destroyed in order to save it. Still, gold makes nice jewelry and coins are fun for the numismatist, so there you have it.

Sechel
Sechel

We're at full employment. I question the idea that the Fed needs to apply the gas every time the engine merely slows down. We're not talking recession at this point simply a reduction in the growth rate all due to bad economic policy, tariffs and a trade war. It's not the Fed's job to bail out the President's bad choices or to get him re-elected.

Sechel
Sechel

If the Fed were a doctor it would prescribe antibiotics for a sneeze

CautiousObserver
CautiousObserver

@Sechel: "I question the idea that the Fed needs to apply the gas every time the engine merely slows down. We're not talking recession at this point simply a reduction in the growth rate all due to bad economic policy"

I question that too, especially in view of the recent explosion in US Federal spending. However, the Fed disagrees with us. They said it twice, in fact. Here it is in black and white from the Fed Chair:

Powell: "[the Committee...will act as appropriate to sustain the expansion...[Previously] the Committee saw no strong case for adjusting our policy rate...[Since then] Growth indicators from around the world have disappointed...the risk of less favorable outcomes has risen...weaker global growth may continue to hold inflation down...[and] added accommodation would support economic activity and inflation...[If uncertainties] continue to weigh on the outlook...we will use our tools as appropriate to sustain the expansion."

There it is in black and white. The Fed thinks they can stop growth from contracting. They just announced that if sentiment does not improve, they will ease. Further, they believe weak growth will contain inflation. The markets are reacting like a July rate cut is a 100% certainty. Gold is reacting like inflation will not be contained.