The first paragraph of the FOMC statement is basically identical to the one in June where they did not cut rates. However, in the 2nd sentence of the 2nd paragraph they said “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 2-2.25%.” That’s all that changed from the June statement to today.
As for what happens next, the committee “will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate” blah, blah blah, the same wording as in June.
As expected and sticking to their guns, Esther George and Eric Rosengren dissented and didn’t want to cut rates.
Bottom line, outside of the rate cut and the announcement that the balance sheet run off will end tomorrow, the only change to the statement was the comment about “global developments” which we can of course attribute directly at the slowdown in global trade and manufacturing. I’d say the Fed crafted the best ‘let’s play it by ear from here’ statement that they could and thus didn’t precommit to anything from here. It is why the 2 yr yield is at 1.85% vs 1.18% just prior and why the dollar rallied and gold fell.
From here, we will get a rate cut seemingly if the data worsens. If it stays the same, where it doesn’t get better but doesn’t get worse, I’m not sure but would lean towards the Fed likely cutting again before year end. Of course if things improve, we won’t be seeing a rate hike but the longer end of the bond market would tighten for them.