Fed On Hold: Highlights, Red Line Statement

Ok, here comes the Fed.

As noted earlier, you shouldn’t expect much from this. This is just “see you f****rs in December.” Bloomberg provides the following helpful context in terms of how the market has reacted to consequential meetings (i.e. those with pressers) and non-presser pow wows:

The S&P 500 gained an average 0.23%, the DXY dollar index fell 0.33%, and the 10-year rose 7 bps after FOMC meetings in March, June and September.

For the non-presser meetings in February, May and July, the returns were -0.02% and 0.01%, and 0.2 bps, respectively.

So there’s that. Additionally, this comes ahead of Trump’s Fed pick tomorrow and at this point, I think it’s safe to say that a hawkish “surprise” (i.e. Taylor) is highly unlikely.

Wednesday’s (non)decision also comes as the tax bill was delayed for a day, which means we’re headed into this with a bias lower in the dollar and yields – until tomorrow when everyone will make themselves believe that there was “movement” on taxes. Headed in, Treasurys pared early losses and the curve flattened after the Treasury maintained coupon auction sizes over the next three months, and the refunding statement didn’t comment on ultra-long issuance. Meanwhile, the greenback swung around wildly as traders attempted to digest an upbeat ADP report followed by a less-than-good ISM print.

Here are the highlights from the Fed just out:

Fed Leaves Rates Unchanged, Says Economy Growing At Solid Pace

Fed leaves rates unchanged in 1%-1.25% range, vote unanimous

Fed says economic activity rising at solid rate despite storms

Fed: inflation for items other than food, energy remained soft

Fed: storms unlikely to alter economy’s medium-term course

Fed: labor mkt continued to strengthen, unemployment declined

Fed: spending rising at moderate rate, investment picked up

Fed repeats mkt-based inflation compensation gauges still low

Fed repeats sees inflation stabilizing around 2% medium term