The Fed press release just came out. I’m getting you my quick bullet points now. Powell press conference in 15 minutes. I’ll update if he says anything that changes my conclusions.
– Fed lowers 25bp (.25%) as expected. This is what the market and DKI thought would happen.
– There was one dissent. Miran, the new addition by President Trump, wanted a 50bp reduction. Lisa Cook voted with the majority for the 25bp reduction.
– Press release cites downside risk to employment as the reason for the cut. This conclusion is reasonable given the data (to the extent that the data is accurate).
– The dot plot was 25bp more dovish. The June dot plot indicated a plurality of Fed Governors wanted to be between 3.75% – 4.00% by year end with a large number of Governors wanting no decreases. The current dot plot is 25bp more dovish – indicating a plurality of Fed Governors expect to reduce the fed funds rate by an additional 50bp from here. That would be a total of 75bp in cuts for the year including today’s cut. One dot was at 5 additional 25bp cuts (total of 6 including today). That was almost certainly Miran.
– Markets are down a little post announcement, but equity indexes tend to swing wildly up and down during Powell’s speeches and when he answers questions.
– GDP projections are up a tiny bit and PCE inflation expectations are unchanged.
All of this is consistent with market’s and DKI’s expectations. No change in outlook from this week’s big macro report which is available and not paywalled on the blog here.
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