It came as no surprise that the Fed held rates steady for a third consecutive meeting.
The statement.
- The FOMC notes that ‘the risks of higher unemployment and higher inflation have risen’.
- The decision to hold rates was unanimous.
The presser.
Chairman Powell ducked and dodged questions probing for forward guidance, maintaining a ‘wait and see’ stance.
- The policy rate is in a good place, and the costs of waiting for further clarity are low.
- The economy is still solid despite the uncertainty.
- The Chairman pointed out that it could take weeks, if not months, for the hard data to offer clarity on the economic picture.
The implications.
- The Fed’s dual mandate of inflation and employment is at risk of being in tension.
- They have little confidence in predicting what lies ahead and are thus highly data-dependent.
- Interest rates are virtually unchanged, as the market continues to anticipate three cuts this year and a 30% chance they begin in June.
