Notes from the Desk – FOMC Meeting – Dialing It Back
As expected the Federal Reserve (Fed) held rates steady and opted to continue quantitative tightening as scheduled.
The good news.
- The Fed dropped references to further rate hikes, and Chairman Powell explicitly stated that the Fed Funds rate was at its peak.
- In the press conference, Chairman Powell said he expected that the FOMC would be lowering rates this year.
- He was coy about the timing of the first cut, merely stating that the Fed would like to see continued evidence that inflation was progressing toward 2%.
Following the meeting and press conference, yields dropped 5-12 bps led by short-end rates.
In our opinion, one shouldn’t get lost in the endless debate about the date of the first rate cut. Instead, the focus should be on the very high probability that cuts are coming sometime this year, which should be positive for fixed-income returns.