Fed Chickens Out Again, Fails To Raise For 55th Consecutive Time - FOMC Statement Comparison

Goldman wins again.

With a 54-0 record without a rate hike (better than Floyd Mayweather's), and 58 Economisseds expecting no change, 3 a half-pregnant 13bps hike, and 53 expecting a 25bps hike, The Fed was always going to break someone's heart today. Bond yields and the USD were tumbling into the decision, which appeared correct as The Fed chickened out again...

  • **FOMC: NO POLICY CHANGE, 0-0.25% TARGET 'REMAINS APPROPRIATE'
  • **FOMC: GLOBAL ECON,FIN EVENTS 'MAY RESTRAIN ECON ACTIVITY'
  • **FOMC: VOTE 9-1; LACKER DISSENTS, WANTED 25 BPS HIKE

Given the "no hike", it is clear that, as we noted, Goldman is still in charge and Hilsy is still leaker-in-chief. All eyes now on the dot-plots as The Fed desperately tries to regain some credibility, stifle uncertainty, and calmly reassure markets that "we've got your back."

Pre-FOMC: S&P Futs 2000.5, 10Y 2.26%, 2Y 77.5bps, EUR 1.1330, Gold $1118

Additional headlines include:

  • **FOMC LOWERS L-RUN EQUILIBRIUM FFR EST TO 3.5% V 3.8% JUNE
  • **FOMC: 11 PARTICIPANTS SEE FFR BELOW 0.5% END 2015 VS 7 JUNE
  • **FOMC: ECON WILL EXPAND MODERATE PACE W/ 'APPROPRIATE' ACCOM
  • *FOMC: LABOR MKT IMPROVED,'SOLID' JOB GAINS, UNEMP DECLINING
  • *FOMC: ONE PARTICIPANT SEES NEGATIVE FFR END-2015 & END-2016
  • *FED: MKT-BASED MEASURES OF INFLATION COMPENSATION MOVED LOWER

Here are the key changes to the statement, which confirm the Fed's third mandate is now official: global stability:

Information received since the Federal Open Market Committee met in June indicatesJuly suggests that economic activity has beenis expanding moderately in recent months. Growth inat a moderate pace. Household spending has been moderate and business fixed investment have been increasing moderately, and the housing sector has shown additional improvementimproved further; however, business fixed investment and net exports stayedhave been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggestsshow that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasingin prices of non-energy imports. Market-based measures of inflation compensation remain lowmoved lower; survey?-based measures of longer-term inflation expectations have remained stable.


Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

The world of economisseds was evenly split...

 

But ahead of the meeting, bond yields started to rip lower...

 

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Since the last FOMC Statement (at the end of July) and FOMC Minutes (8/19), equities and bonds have underperformed...

 

Hike! - 42-year low jobless claims...

 

Don't Hike! - Inflation expectations testing post-crisis lows...

 

Not "Priced In"

Charts: Bloomberg

 

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Full Redline Statement below:

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