FOMC on hold and in no hurry to cut further

Wells Fargo Research Team Wells Fargo

Summary

As universally expected, the FOMC decided at its policy meeting today to keep rates unchanged. The decision to maintain the target range for the federal funds rate at 4.25%–4.50% was universally supported by all 12 voting members of the FOMC.
The post-meeting statement continued to describe the pace of economic activity as "solid." It also upgraded its characterization of the labor market. Previously, the Committee said that "labor market conditions have generally eased." The FOMC now views labor market conditions as "solid."
The FOMC continues to characterize inflation as "somewhat elevated."
In sum, there was little in today's statement to suggest the FOMC is contemplating another rate cut in the near future.
With the pace of real economic activity holding up and with inflation remaining above target, we think the FOMC will keep rates on hold until the second half of 2025.

FOMC appears to be in little hurry to cut further

As universally expected, the Federal Open Market Committee (FOMC) left its target range for the federal funds rate unchanged at 4.25%–4.50% at the conclusion of its meeting today. Unlike in December, when Cleveland Fed President Beth Hammack dissented from the decision to cut rates by 25 bps—she preferred to keep rates on hold at that meeting—today's decision was unanimously supported by all 12 voting members of the Committee.

The post-meeting statement continued to note that "economic activity has continued to expand at a solid pace." It also stated that "the unemployment rate has stabilized at a low level in recent months." In that regard, the unemployment rate trended up from 3.4% in April 2023 to 4.2% in mid-2024. But it has subsequently leveled off at just over 4%. The statement went on to characterize labor market conditions as "solid." This characterization of the labor market represents an upgrade from the December statement, which said that "labor market conditions have generally eased."

Download the Full Report!

Author

Wells Fargo Research Team

Wells Fargo

AUD/USD sticks to neutral bias above 0.7100 amid cautious markets

AUD/USD holds steady above 0.7100 in the Asian session on Monday as the US Dollar stalls its modest pullback from the highest level since late July amid persistent geopolitical uncertainties. The PBOC status quo on Loan Prime Rates also weighs on the Aussie. However, bets on another RBA rate hike continue to underpin the Australian Dollar ahead of the Trump-Xi Summit.

USD/JPY eases below 157.00 amid looming intervention risks

USD/JPY is easing back below 157.00 in Asia on Monday, undermined by modest Japanese Yen strength amid looming intervention risks after Friday's BoJ rate check. A Japanese holiday also keeps traders on edge amid escalating geopolitical tensions between Russia and Ukraine and in the Middle East. As a result, the US Dollar pauses its pullback, limiting the pair's downside.

Gold: Sellers test $4,350 on renewed USD upside

Gold kicks off the new week on a weaker note following Friday's failure near the $4,400 mark. The commodity currently trades near the $4,350 level as traders await further developments surrounding the Middle East crisis and their implications for inflation. This would influence interest rate expectations and, in turn, drive the non-yielding bullion.

Dogecoin extends gains as ETF inflows return and momentum improves

Dogecoin extends its recovery, trading above $0.088 after gaining nearly 6% last week. The bullish price outlook is supported by the return of institutional demand through DOGE spot Exchange Traded Funds. Meanwhile, improving momentum indicators and signs of whale accumulation suggest a positive outlook for the dog-themed meme coin.

Economics week ahead

This week is light on the domestic data front, with focus on Thursday's new home sales report. We expect sales to partially recover in August, rising 2.6% to a 623K pace after a sharp decline in July. Higher mortgage rates continue to weigh on affordability and demand, though builder incentives remained in place and conditions did not worsen materially during the month.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.