How is the Fed outlook shaping up after the FOMC meeting and Powell’s presser?

There were fears of a more hawkish leaning by the Fed going into the FOMC meeting yesterday. But the statement language itself didn’t offer up too much and Powell also successfully sidestepped any questions about moving back to rate hikes. That was enough to pin down the dollar while stocks rallied initially before giving all of that back.

The takeaway here is that the Fed is not that desperate yet to admit that economic developments might warrant them to consider hiking rates again. So, the policy stance remains unchanged for now. That being either they’ll cut rates or if needed, they’ll just stay on hold for a longer period of time.

That’s pretty much it and Powell made it clear by saying that “we are prepared to hold rates higher for as long as appropriate”.

So, how has the Fed outlook shifted in that regard? Not much really.

The total rate cuts priced in for the year is at 35 bps currently. It was roughly 31 bps before the Fed yesterday. Meanwhile, the odds of a September rate cut are at ~66% with November seen at ~92% at the moment. That’s not a dramatic shift from before the meeting and Powell’s presser either.

So, what’s next?

It is all about the data to see how that will shift economic expectations and the Fed’s view. And we won’t have to wait too long for that. The next one on the chopping block will be the US jobs report tomorrow.