While all yields are lower since the last FOMC meeting, the short-end has dramatically outperformed (with the last few days rescuing the long-end). The curve has steepened dramatically with 2s30s swinging from -45bps to +10bps since the last meeting...
Source: Bloomberg
And finally, right in the middle of The Fed's meeting NYBC blows up, sending rate-cut expectations soaring (as traders reached for safe-havens like gold and bonds), putting The Fed in the awkward position of likely having to push back against the bullying market (after all the jawboning of the last month was wasted)...
Source: Bloomberg
So, what did The Fed do (and say)...
The FOMC voted unanimously to leave benchmark rate unchanged - as expected - in target range of 5.25%-5.5% for fourth straight meeting while making significant changes to statement
The statement was very much more hawkish than expected:
The Fed pushed back aggressively against the dovish market stance:
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
The Fed did leave the door open for cuts at some point...
“The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance.”
The Fed removed any reference to "tighter financial conditions", which makes sense given that financial conditions have massively loosened...
In what appears an implicit nod to 'animal spirits' in the economy, The Fed removed any reference to "growth slowing from its strong pace."
Perhaps most notably, The Fed removed the following sentence from the statement:
"The U.S. banking system is sound and resilient."
Which makes sense given the shitshow at NYCB today (and the March chaos ahead).
Does the Fed no longer saying that "the U.S. banking system is sound and resilient" mean the banking system is no longer sound and resilient, or was it just a lie before to convince the population of something which was not the case?
The new statement is a sea of red...
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