DATA & FIGURES
The Fed's decision to hold rates unchanged was unanimous, with no dissents. The 'dots' plot shows a significant shift towards a more hawkish stance, with 3 rate-hikes predicted by some members, 2 rate-hikes by others, and 1 rate-hike by a smaller group. The statement was shortened, with a focus on maintaining an ample level of reserves through purchases of Treasury bills and other securities. The core PCE inflation forecast has been revised upwards to 3.3% for this year, and 2.5% for next year.
THE SCENARIO
The US macro-economic data has surprised to the upside since the last FOMC meeting, with strong 'hard' and 'soft' data and a resilient labor market. The market has shifted significantly more hawkish since the last FOMC, with $291K in volume on a Polymarket question about Apple's potential new product line, and $25.2M in volume on a question about the Strait of Hormuz traffic.
DIRECT QUOTE
"The market is focused on the dot plot for now, with half the committee thinking there will be hikes. The bear flattening seems reasonable based on that. Those who looked for a quiet first Warsh FOMC meeting must be disappointed." — Ira Jersey, BBG rates strategist
BBN INSIGHT
The Fed's decision to hold rates unchanged and the shift towards a more hawkish stance are significant developments for the US economy and financial markets. The focus on price stability and the upward revision of the core PCE inflation forecast suggest that the Fed is prioritizing inflation control over employment.