Fed Cuts Rates By 25bps As Expected, Removes ‘Dovish’ Inflation Language

It’s been an ‘eventful’ six weeks since The Fed decided (on Sept 18th) to slash interest rates by 50bps.

The macro-economic data has literally exploded stronger…

Source: Bloomberg

…with inflation reigniting and growth surprises soaring…

Source: Bloomberg

…and that has slammed rate-cut expectations down by over 100bps…

Source: Bloomberg

Which has helped lift gold and stocks while crude prices have collapsed (and Bitcoin has gone vertical)…

Source: Bloomberg

But, more problematically, the mortgage rate has ripped higher since The Fed cut…

Source: Bloomberg

The market is fully priced for 25bps cut today, but December is now a coin-toss (54% odds of another 25bps).

Will The FOMC (and Powell’s presser) jawbone expectations down further? Will Bowman dissent again?

So what did The Fed do?

• *FED LOWERS BENCHMARK RATE 25 BPS TO 4.5%-4.75% RANGE

• *FED SAYS RISKS TO GOALS REMAIN ‘ROUGHLY IN BALANCE‘

• *FED: LABOR MARKET CONDITIONS HAVE ‘GENERALLY EASED‘

No dissent on this rate-cut decision.

Key changes:

• Most notably, removing language that Fed has “gained greater confidence that inflation is moving sustainable toward 2 percent”.

• Adding that labor market conditions have “generally eased” since earlier in the year, replacing “job gains have slowed”.

Read the full redline below: