How the Fed Drove a Rally in Bonds and Stocks

The Federal Reserve delivered a widely expected 25-basis-point (bp) rate cut in December, then signaled a more data-dependent path ahead. Barring an economic shock, we probably won’t see another rate cut until the second half of next year. In the weeks since the previous meeting in October, several Fed officials had expressed discomfort with further rate ...

As widely expected, the FOMC made a 25 bps cut to the target range for the federal funds rate to 3.50-3.75% from 3.75-4.00%. As we suggested, there were dissents in opposite directions: Chicago Fed president Austan Goolsbee and Kansas City Fed president Jeffrey Schmid did not want to cut and Trump’s quartermaster Stephen Miran wanted to cut by 50 bps. Note ...

Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. 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. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. FOMC STATEMENT COMPARE: pic.twitter.com/mc1yqrnwIP *FED SAYS SCHMID, GOOLSBEE DISSENT IN FAVOR OF NO RATE CHANGE FOMC: POLICY STATEMENT NO LONGER SAYS UNEMP RATE HISTORICALLY LOW BUT THAT 'JOB GAINS HAVE SLOWED THIS YEAR;' UNEMP RATE 'HAS EDGED UP THRU SEPT' #FOMC #FederalReserve #economy