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US TSYS: FOMC Delivers Not So Hawkish Hold

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Treasuries gapped lower after the FOMC left the target rate steady at 4.25-4.5 but removed reference to making progress towards inflation reaching goal. Guidance unchanged. The apparent hawkish shift in the statement saw the US$ climb to near early session highs, while stocks extended lows as the prospect of lower rates moved further out the curve.
  • Chairman Powell dispelled the initial hawkish take as he explained we "were just cleaning up the language: We took out a reference to since earlier in the year as it related to the labor market, and we just chose to to shorten that sentence."
  • Stocks bounced off lows after Chairman Powell said "the Labor Market is not a source of significant inflationary pressures. Inflation is eased significantly over the past two years, but remains somewhat elevated relative to our 2% longer-run goal."
  • Treasuries recovered to steady/mildly mixed as Powell stated "inter meeting data was good, and there was another inflation reading just before the December meeting. So we've got two good readings in a row that are consistent with 2% inflation. Again, we're not going to overinterpret, two good or too bad, readings, but this was not meant to send a signal."
  • Cross asset update: BBG US$ index reversed initial gain to currently 1301.58 (+.39) vs. 1303.92 post FOMC; Gold well off lows (2757.14 -6.34); stocks pare losses with SPX Eminis at 6069.0 vs. 6042.25 low.
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  • Treasuries gapped lower after the FOMC left the target rate steady at 4.25-4.5 but removed reference to making progress towards inflation reaching goal. Guidance unchanged. The apparent hawkish shift in the statement saw the US$ climb to near early session highs, while stocks extended lows as the prospect of lower rates moved further out the curve.
  • Chairman Powell dispelled the initial hawkish take as he explained we "were just cleaning up the language: We took out a reference to since earlier in the year as it related to the labor market, and we just chose to to shorten that sentence."
  • Stocks bounced off lows after Chairman Powell said "the Labor Market is not a source of significant inflationary pressures. Inflation is eased significantly over the past two years, but remains somewhat elevated relative to our 2% longer-run goal."
  • Treasuries recovered to steady/mildly mixed as Powell stated "inter meeting data was good, and there was another inflation reading just before the December meeting. So we've got two good readings in a row that are consistent with 2% inflation. Again, we're not going to overinterpret, two good or too bad, readings, but this was not meant to send a signal."
  • Cross asset update: BBG US$ index reversed initial gain to currently 1301.58 (+.39) vs. 1303.92 post FOMC; Gold well off lows (2757.14 -6.34); stocks pare losses with SPX Eminis at 6069.0 vs. 6042.25 low.