Since the last FOMC meeting (on March 18), gold has been clubbed like a baby seal ("EM piggy bank") while stocks and oil have surged (with the former ignoring the peril of the latter)...
During that time, Fed rate-change expectations have swung violently from a full rate-cut to a full rate-hike and fallen back to no change at all in 2026, notably (hawkishly) rising in the last few days as oil prices surged back to war highs...
On the macro front, The Fed's dual mandate is in play as (surprisingly) inflation has surprised to the downside while growth has surprised to the upside...
Notably, The Fed doesn't need to cut rates today for monetary policy to get easier as inflation expectations are rising so much that ex-ante real rates have fallen to the lowest since November and are close to turning negative...
As we detailed earlier, recent labor data (March jobs, ADP, claims) has shown resilience and potentially some green shoots. To Bank of America, this should reduce the sense of urgency to shore up the labor market among the doves.
But, as a result of latent inflation threats, some of the most prominent doves on the committee have changed their tone of late. In a speech last week, Waller emphasized not only upside risks to inflation from the Iran war.
Nevertheless, with all that behind us, the market is expecting a big fat nothingburger from Fed Chair Powell's last (maybe) FOMC meeting, but is expecting an indication of 'two-sided risks' with a single dissent (from Miran calling for a 25bps cut).
What The Fed Did and Said...
Most divided Fed in 34 years votes to hold rates unchanged as expected BUT... With 4 No Votes, Powell's Final Meeting Garners Most Dissents in 34 Years
*FED: HAMMACK, KASHKARI, LOGAN VOTED AGAINST EASING BIAS, BACKED
*FED SAYS GOVERNOR STEPHEN MIRAN DISSENTS IN FAVOR OF RATE CUT
And the dissents highlighted by the level of uncertainty...
*FED: MIDDLE EAST DEVELOPMENTS ADDING HIGH LEVEL OF UNCERTAINTY
*FED: INFLATION IS ELEVATED, PARTLY REFLECTING ENERGY PRICES
Developing...
Read the full red-line of The Fed statement below:
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