Fed Wrap - New monetary medicine
Key takeaways
- At the October meeting, the Federal Reserve held rates, maintaining the upper band of its policy rate at 4%.
- The data-dependent commentary was an interesting addition and likely shows the Fed may be on a slower policy hiking path as it takes more time to digest incoming data before committing to additional hikes.
- The market is expecting another hike at the December meeting, and with only one inflation report, it seems unlikely that there will be sufficient information for the Fed not to deliver.
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 meeting began as a mundane event with minimal takeaways but quickly evolved into a guessing game for market participants as Chair Warsh took the podium.
Discussions of new “monetary medicine”, family fights, and adjustments to the Fed’s 2027 schedule had the market unsure about the Fed’s decision-making approach.
At the October meeting, the Federal Reserve held rates, maintaining the upper band of its policy rate at 4%. There were two dissents in favour of hiking, partly reflecting the dot plot from the September meeting, which had four voters forecast two more hikes through 2026.
The main changes to the statement were upgrading the assessment of economic activity to “strong” and adding language about monitoring data ahead of future policy decisions. The statement maintained language that inflation remains elevated, and taken with the firm language regarding economic strength, likely supports an additional hike at the December meeting.
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.
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