While the dollar is up, every other asset class is lower since the September FOMC statement ahead of the least-anticipated Fed meeting of the year. Fed funds implied a 14% chance of a rate hike today but sentiment was for a 0% chance with expectations of a hawkish-biased statement (67% prob of Dec hike). From Bloomberg:
With no press conference to explain the latest phrasing, we can only assume the jawboning and newspeak will be heavy to covince the world December will be a “dovish hike.”
Notably, while in the September meeting there were 3 disenters, George, Mester and Rosengren, this time Rosengren decided to join the majority, leaving just two dissenters.
While the statement itself contained 7 fewer words than in September, there were virtually no changes. Perhaps the most notable change in the wording of the statement is that the following phrase was struck out:
“Inflation is expected to remain low for the near term”
and replaced with
“Inflation is expected to rise to 2 percent over the medium term”
The Fed also changed the language to the phrase that “Market-based measures of inflation compensation remain low” and replaced it with “…have moved up but remain low.”
The one negative is that the degree of spending was downgraded as “Household spending has been growing strongly” has been changed to “rising moderately.”
The FOMC also said that “The Committee judges that the case for an increase in the federal funds rate has continued to strengthen” strongly hinting that a December hike is now almost inevitable absent a market crash.
Also of note, as Bloomberg reminds us, remember when June was a good deal about Brexit? There is no mention of uncertainty related to the U.S. election, as expected. The FOMC message is the committee makes its decisions with no notice of politics.
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A quick breakdown of the salient points from Bloomberg:
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Today's tumble in crude pushed everything red post-FOMC (with a notably uniform 1.7%-ish drop in assets oddly mirroring a 1.7%-sh rise in the US dollar)…
As The Dollar and rate hike odds have moved almost perfectly in sync…
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Which is not true… The Fed's own labor market indicator is now in contraction YoY:
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Full redline below: