- Rates hiked by 25 basis points, as expected
- Prior was 3.50%-3.75%
- Unanimous vote
- Repeats that “inflation remains elevated”
- Forecasts show slightly higher inflation and slightly lower unemployment
The market was pricing in a 90% chance of a rate hike today and they met that, avoiding a credibility nightmare. Morevoer, the unanimous decision shows some real political independence and that’s a major sign of relief on many fronts. It also suggests a further collective appetite to hike that will make the final two meetings this year very interesting. For now, we’re pricing in 28 bps in additional hikes this year compared to 26 bps beforehand.
Finally, the comment in the statement about the US consumer is slightly hawkish and the inflation note remains. The US dollar strengthened across the board, which is what you would expect. Eyes are now on the long end of the Treasury curve to see if there is some bidding. So far, the signs are good as 10s are down 4 bps and 30s down 5 bps, both near session lows (though certainly aided by oil today).
The statement said:
The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:
The Committee decided to raise the target range for the federal funds rate by 1/4 percentage pointto 3-3/4to 4 percent, in support of the Federal Reserve’s dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.
Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments,domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.
The prior statement said:
Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
The change is the ‘domestic spending has been resilient’ like but note that
This article was written by Adam Button at investinglive.com.