FOMC: careful, but more dovish than hawkish

Paid subscriber analysis

The Fed paused rate cuts, as expected.

In the statement however, the initial feel was that they added some hawkishness. Notice the track changes part of the FOMC statement (see below).

They left rates unchanged, added that unemployment has stabilized at a low level, but also removed the wording that “inflation has made progress towards the 2% objective”, leaving only that it remains elevated.

This was interpreted as hawkish. So the markets sold off (-0.8% on SPX) briefly and waited for Powell.

Then Powell came on.

And immediately removed any doubt that the statement should be interpreted as hawkish. He stated that they just changed the wording a bit and that by no means does this imply that the Fed is anchoring away from their 2% target.

He also elegantly fenced off the question that Trump is influencing his policy decisions. He refused to comment and was generally unconcerned on that end.