No Comment

The FOMC maintained its target range for the fed funds rate at 3.5%-3.75%.  The vote had two dissenters, with Governors Waller and Miran, in favour of a 25 bps cut.

Notables.

Overall, the Fed painted a picture of a strengthening economy.

• They shifted their description of economic activity from moderate to solid.
• The unemployment rate has shown some signs of stabilization.
• Inflation remains somewhat elevated, but there are some positive signs:
  • Disinflation in some areas of the service sector
  • Tariff pass-through appears to be largely behind us.
• On the dual mandate, the upside risk of inflation and the downside risk to the labour market have both diminished.
• Chairman Powell maintained a ‘no comment’ stance with respect to any ‘political’ questions.

The conclusion.

• The Fed remains on hold, with a bias towards easing, as per Powell; hiking isn’t on their radar.
• The bond market is expecting two cuts this year.  Based on today’s comments (or lack thereof), that assumption and yields haven’t changed.