Since the last FOMC meeting (9/16), where Fed Chair Warsh hiked rates somewhat surprisingly, markets have been wild (even if stocks at the index level may look 'meh'). The biggest standout is the divergence between bitcoin (up 6%) and gold (down 6%) with a rollercoaster in crude (from down 15% to down just 3%)...
While that chart shows bonds 'meh' like stocks, the volatility in bond yields has been instructive as the growth-fearmongers suddenly dominated the bond vigilantes...
But, while the SPX may have done ok, it is the NDX (and more critically the tech scene below the surface) that has moved market's from pricing in a hike today (80% odds a week after the Sept Fed) to pricing in a pause now (7% odds of a hike going in). Dec odds have remained high throughout and risen recently as AI chaos crushed Oct odds...
Of course, how he explains his decision - and what that does to forward rate expectations - will be a key focus of the press conference. For now, we are at basically one more hike in 2025 (as above) and back above 2 more hikes for 2027...
With all that said, it will be interesting to watch the number of dissents (most expect 3 dissents again - not a good look), and if they attempt to put any 'excuse' for not hiking this close to the Midterms in the actual statement...
...they 'paused' of course - one thing The Fed does not like doing is surprising the market...
- *FED VOTES 10-2 TO HOLD BENCHMARK RATE IN 3.75%-4% RANGE
As a reminder, July's hold triggered three hawkish dissents from Hammack, Kashkari and Logan.
This time Lisa Cook joined Hammack! Political?
Warsh did say in July that he "asked for a good family fight" and got one... but this time the fight seemed less hawkish.
Language changed a little.
Keeps:
"The Committee is continuing its policy of maintaining ample reserves in the banking system."
Keeps:
"Inflation remains elevated."
But Adds:
"The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation".
So that's Warsh's out for the presser.
A bit of a non-event but Lisa Cook dissenting smacks political to us.
Read the full redline below...
