Fed Stands Pat on Rates for Possibly the Last Time
After a year of restrictive policy, the committee hints that cuts may be on the way.
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The Fed was not explicit in their policy plan (for rate cuts) but it was a bit more guarded in their language of monetary policy. The committee decided to keep rates at 5.25-5.5% today, exactly a year after the last rate move was made (hike in 2023). The language in the statement was similar to June, and that tells us the committee is sitting around neutral (not hawkish or dovish), but we (and the market) believe the next policy move will be a rate cut.
Wording in the statement was crafted to be careful, as usual. Within the statement was the same language here as in June: "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals." We would consider this to be "pre-dovish" if we wanted to drill it down to its core.
The committee will continue to reduce its holdings of Treasury securities, agency debt and mortgage-backed securities, maintaining their stance of moving inflation towards its 2% goal. All members voted in unison for continuing policy objectives.
We'll have more tomorrow as we discuss the all-important press conference with Chair Jay Powell.
