Federal Reserve
- A 25 basis point rate cut was fully priced in
- The Fed removes the line “the Committee has gained greater confidence that inflation is moving sustainably toward 2 percent”
- Prior statement repeats that economic activity “has continued to expand at a solid pace”
- On employment says “Job gains have slowed, and the unemployment rate has moved up but remains low” vs “labor market conditions have generally eased, and the unemployment rate has moved up but remains low”
- Repeats that inflation has made progress towards target
- Repeats that “the Committee would be prepared to adjust the stance of monetary policy as appropriate”
- No dissents
The removal of the line about greater confidence may highlight that they have less confidence that inflation is going to stay low in light of better data. Powell will certainly be asked about that.
Update: He said there is no signal in the removal of the line about “gaining greater confidence”
Before the decision, the market was pricing in a 68% chance of another cut in December and 110 bps through next October. USD/JPY was trading at 153.01 ahead of the decision and 2-year yields at 4.21%.
There has been a small hawkish reaction to the statement with USD/JPY up to 153.29 and 2s up 2 bps.
Fed Chair Jerome Powell will hold a press conference at the bottom of the hour (2:30 pm ET).