Wall Street Reacts To Powell's Last FOMC Meeting

The kneejerk reaction from Wall Street pundits is that the bar for the Federal Reserve to hike rates is still relatively high and there’s no need for the Fed to change its bias or react in a meaningful way: that's the view voiced by SocGen's US Research Head Subadra Rajappa, who said on BBG TV that the "US is in a very good position overall"

Others, such as Deutsche Bank Chief US Economist Luzzetti, said that "the Fed could adopt a more balanced language" while JPMorgan Head of Global Fixed Income Bob Michele notes that "the US economy looks pretty good and can absorb some inflation" adding that "inflation is passing through the system" and so "need to watch if cost-push inflation passes to prices."

Michele also said that he’s reluctant to say this time the economy will stumble given how the economy managed tariffs last year, and believes that the Fed cold remain on hold until end of this year, even as "the bar to hike got lowered a notch."

Below we summarize several views from across Wall Street:

• Katherine Judge at CIBC Capital markets: "Oddly, the statement noted that three members who supported maintaining the target range did not support including an easing bias in the statement, even though the text they were objecting to was not present in the statement."
• Simon Penn, UBS trader: "Hammack, Kashkari and Logan said they didn't support the easing bias. The easing bias itself is reflected in the following sections: "attentive to the risks to both sides of its dual mandate."
• Maria Capurro, Bloomberg Econ: "We won’t know what really drove the dissenters until they release their public statements, but it is worthy to note this is the committee that Kevin Warsh, Trump’s appointee, will now face: one with growing dissents, where at least some officials do want to make it clear a rate hike is on the table"
• Ian Lyngen at BMO Capital Markets: his take is the forward-guidance language as having been interpreted as an easing bias: The relevant language is “In considering the extent and timing of additional adjustments to the target range” - not clearly biased toward easing, but it has been interpreted as such in the past. 
• Joseph Brusuelas, chief economist at RSM: "The dissents could also be about preserving Fed’s independence: One gets the sense that the three dissenters are signaling a willingness to not only protect central bank independence but also the incoming bias towards rate cuts when inflation is clearly heading in the direction that may require rate hikes."
• Nic Puckrin, macro analyst and CEO of Coin Bureau: "The chance that we won’t see a rate cut at all this year has increased to 77%. However, other central banks – notably the BOJ – are already discussing hikes. Most commentators don’t expect hikes from the Fed, yet the central bank could begin running out of options. This doesn’t bode well, because hiking could mean plunging the banking and private credit sectors into crisis. Wall Street banks now hold more US treasuries than at any point since the GFC in 2007 – up 37% from last year to $550bn. If rates rise, this could become a massive liability, while private credit is already under enormous pressure at current rate levels."
• David Russell, Global Head of Market Strategy at TradeStation: "Miran is increasingly a lonesome dove. Today’s dissents show the pendulum is swinging away from rate cuts. Inflation is a growing risk as oil soars and the job market remains tight. March’s durable goods orders also confirm the strong economy and remove the need for easing. The AI datacenter boom is making it easier for policy to be far less necessary. Kevin Warsh could be stepping into a difficult spot if he was hoping to deliver rate cuts."

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