The Fed held fast today, as expected, but our focus is on the entirety of the statement, more then focusing on the rate action.
I see both dovish and hawkish points in the statement. I see a no move on the balance sheet as significant. They scoffed at slowing growth, calling it likely transitory, but frankly the market hasn’t been buying it, hence 10s being closer to 2 then 3. On balance I call this statement Dovish. Not in words, more in my interpretation.
Here’s what I mean:
1. If the Fed wasn’t hawkish, further into a hike cycle, where the market has been bracing for it, does this signal some underlying concern about the data.
2. I’ve blogged this 100 times; when has the Fed been right about growth??? Therefore, if they are ignoring Q1 weakness, yet still not moving, what happens when/if Q1 weakness turns into Q2 weakness or even 2017 weakness. Further, if employment continues to strengthen per the Fed, how do we explain 98k. Frankly all of this rings a bit hollow to me.
All I can say is #LowerForLonger #WindowIsClosing #CanEveryQ1TankBeTransitory?? #98IsTheNext200k
ISM services did beat today. So far I’d say nosiest of the rate stuff has gone in our favor this week and we wait for NFP Friday. I wouldn’t change my ranges, so govern yourselves accordingly. If you aren’t familiar with the ranges, please check our my previous posts. We’d like to close below 2.32 today to stay in that lower range. We are moderately weaker v 1:59.