Fed Wrap - Less guidance, more uncertainty
Key takeaways
- The US Federal Reserve held rates steady during Chair Kevin Warsh’s second meeting, which offered little insight into the Fed’s current thinking.
- Warsh reinforced the Fed’s 2% inflation target but showed a preference for markets to respond directly to economic data rather than rely on Fed commentary, increasing uncertainty around future decisions.
Ryan Weldon, from IFM Investors’ Debt Investments team in New York, features in our Fed Wrap market analysing the outcomes from the latest meeting by the US Federal Reserve (Fed).
In this edition, Ryan discusses how the Fed held rates in a 9-3 vote, maintaining the upper band of their policy rate at 3.75%. The three members that dissented did so in favour of a hike with the market widely expecting that any policy decision would not be unanimous.
There were virtually no changes to June’s shortened statement and the Fed maintained their comments committing to delivering price stability. However, the Fed also maintained language attributing current inflation, in part, to supply shocks which will give them flexibility in their policy decision in September.
Overall, the market anticipated an exciting meeting, pricing in a 33% chance of a hike, only to be left with an underwhelmingly mundane outcome and little to over-analyse.
Ryan Weldon
Ryan supports the dealing and portfolio management functions of IFM Investors’ cash and fixed income portfolios in the US. He also assists in the execution of foreign exchange and derivative overlay strategies for internal and external clients.
Related articles
Fed Wrap – Warsh makes his mark as chairman
Fed Wrap – Split Fed see economic uncertainty
Learnings over two decades of Global Treasury Investments
