Peter Boockvar

After the short commentary on the economy, not much different than what was said in February, the Fed added this to their statement, “The US banking system is sound and resilient.” I figured that would either be thrown in the statement or said many times in the press conference. And then it was followed by the acknowledgement of the new economic world we’re in, “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.” And they repeated at the same time their focus still on price stability, “The Committee remains highly attentive to inflation risks,” the same wording seen for the past many statements.

The other tweak but very notable was this, “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.” I bolded ‘may’ because the word used at the previous meeting was ‘will.’ QT continues on.

There was magically no dissents as all 11 voters signed up for this rate increase. A bit of dissent is a good thing and this consensus mentality needs to be shaken up.

As for their median estimates, there was very little change to GDP and unemployment forecasts. The GDP forecast for this year is up .4%, down one tenth from the December projection, though their unemployment rate forecast actually fell one tenth to 4.5% but which is well above where it is now. They raised their core PCE estimate to 3.6% from 3.5%. I’m not going to bother giving their 2024 estimates because who the heck really knows.

Bottom line, I said this morning that this over hyped meeting was most likely going to be a non-event and it certainly was. That said, the Powell press conference will certainly be a forum for more notable market moves. We’ll see how he does the financial stability vs price stability dance. Either way, the Fed is likely done hiking and the 2 yr yield is down 7 bps from where it was right before the statement hit the tape. The 10 yr yield at 3.54% is exactly where it was, thus some steepening. The fed funds futures yields are down between 10-15 bps too in response with today being the terminal rate and rate cuts to come late summer. The markets can now shift their focus to Q1 earnings in a few weeks and that will be another mine field.