The Federal Reserve completed its April meeting, and kept the fed funds rate unchanged. Your bullet points ahead of Chairman Powell’s 2:30PM press conference.

 

• The fed funds rate remains unchanged at 5.25% – 5.50%. Earlier this year, most market participants expected the Fed to cut by either the January meeting or the March one. DKI said that wasn’t going to happen. Market expectations shifted, and today’s “pause” was not a surprise. Expectations for the first rate cut recently moved from June to September, but early betting this afternoon is now trending towards November.

 

• The press release was more clear than usual. Last month, there was intentional ambiguity in the language used. This month, the release notes expanding economic activity and a strong job market. It also says the Committee is “strongly committed to returning inflation to its 2 percent objective” and admits there has been a lack of progress in recent months towards getting there.

 

• This is a slightly more hawkish message than we saw last month, but as always, the Fed says it will remain data driven and continually evaluate conditions.

 

• The only meaningful change is the Fed announced an intention to start to taper quantitative tightening (QT). That means they’ll slow the rate at which they shrink the Fed balance sheet. Monthly net redemptions on Treasury securities are being cut from $60B to $25B. Monthly redemptions of other securities like mortgage-backed securities will stay at $35B.

 

• I’ll be on Powell’s press conference which starts shortly and will post any additional information should he say something newsworthy.

 

• DKI continues to believe that inflation is elevated, understated, and a problem that won’t be solved soon. We maintain positions in inflation hedges and beneficiaries like Bitcoin, gold, and energy. Subscribers are encouraged to check out the Current Recommendations page for specific tickers.

 

GB@DeepKnowledgeInvesting.com if you have any questions.

 

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