The Fed cut interest rates 25 basis point to a target of 1.75% to 2.00%. There were three dissents.
Dot Plot and FOMC Statement
The Dot Plot is from Projection Materials. Here is an excerpt from the full FOMC Statement
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.
Three Dissents
- Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent
- Esther L. George and Eric S. Rosengren preferred to maintain the target range at 2 percent to 2-1/4 percent.
Tapering and Balance Sheet Reduction Still On Hold
The Committee directs the Desk to continue rolling over at auction all principal payments from the Federal Reserve’s holdings of Treasury securities and to continue reinvesting all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month. Principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20 billion per month will continue to be reinvested in agency mortgage-backed securities.
Interest on Excess Reserves Lowered
The Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on required and excess reserve balances to 1.80 percent, effective September 19, 2019. Setting the interest rate paid on required and excess reserve balances 20 basis points below the top of the target range for the federal funds rate is intended to foster trading in the federal funds market at rates well within the FOMC’s target range.
Statement Tracker
Three Fed Changes
The WSJ Statement Tracker shows three changes.
- Household spending went from "growth picked up" to "rising at a strong pace".
- Business investment went from soft to "weakened"
- Exports are a new item. Exports "weakened".
Observations
"Powell READING his answers to not say anything that gets him in hot water."
Danielle DiMartino @DiMartinoBooth
"So Powell thinks that cash flows known weeks in advance are to blame for Repo pressures. He is either full of sh.t or a moron."
Holger Zschaepitz @Schuldensuehner
"#Fed's Powell on Repo blowout: Market response to funding issues was surprising. Fed well aware of potential funding pressures. We will revisit question of when to grow balance sheet. Repo Overnight Rate remains > Fed's upper bound."
Fed Discusses More QE
"And there it is:
POWELL: MAY RESUME ORGANIC B/SHEET GROWTH EARLIER THAN THOUGHT""POWELL: WE WILL REVISIT QUESTION OF WHEN TO GROW BALANCE SHEET
And with that, repo fireworks are coming"
Expect More Cuts
I side with those who expect more rate cuts.
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
Recommended Content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. As this coiling up comes undone, investors can expect XRP to kickstart a massive rally.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.