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 indicatesthat economic activity has beenexpanding moderately in recent months. Growth inHousehold spending has been moderateand the housing sector has shown additional improvement; however, business fixed investment andnet exports stayedsoft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range oflabor market indicators suggeststhat underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlierdeclines in energy prices and decreasingprices of non-energy imports. Market-based measures of inflation compensation remain low; 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. 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
.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 earlierdeclines 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"
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Full Redline Statement below: