"The Fed Did Not Tip A September Cut, By Any Stretch": Wall Street Reacts To The FOMC Statement

As the market tries to digest Fed speak, here are some of the fastest Wall Street commentators and strategists piling on with their initial reactions to the FOMC statement, if not Powell's presser.

UBS trader Leo He:

"The Fed keeps rates unchanged. In the policy statement, the Fed changes its language to "the Committee is attentive to the risks to both sides of its dual mandate," where previously it said "the Committee remains highly attentive to inflation risks". However, the Fed maintains: "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." This statement is definitely more dovish than the June statement, as the Fed says they are focusing on dual mandates now. But this is definitely not a complete pivot. Austan D. Goolsbee, the most dovish FOMC member, voted as an alternate member at this meeting, as Mester retired. Beth M. Hammack will take the president office of Cleveland Fed later this month and likely take over the voter role from September."

Derek Tang, economist with LH Meyer/Monetary Policy Analytics:

“Quite balanced, and nicely captures the moderation in inflation and the real side without fueling the flames of adding a November cut too. A September easing should still be a go, barring anything that would stay their hand. It would be hard to see what would do that at this point.”

Win Thin, global head of markets strategy at BBH:

“I think many were hoping for some sort of softening here, along the lines of ‘we have somewhat greater confidence’ but the Fed did not tip a September cut, by any stretch. I think they will cut, but the Fed is playing its cards close to its chest. Marginally less dovish than expected."

Ira Jersey, Bloomberg Intel chief rates strategist:

“Overall, the Fed’s policy statement appears to meet our expectation in that it is balanced. The new phrase ‘risks to both sides of its dual mandate’ doesn’t signal a September cut is imminent. The front end of the curve selling off the knee-jerk bear flattener seems reasonable. Powell’s press conference may be more telling than the incremental shifts in the statement.”

George Catrambone, head of fixed income, DWS Americas:

“The risks are much more two-sided. They’ll be able to get more data to confirm the disinflationary path, but soft landings don’t materialize by waiting too long to cut.”

Neil Dutta, Renaissance Macro

“With language like this, it means the Fed will have to make a more pronounced shift in language in September. I am surprised stocks are holding up on this statement. Perhaps equities are looking ahead to the press conference. The minutes of today’s meeting, along with the Jackson Hole central banking conference in August, will offer further opportunities."

Erica Adelberg, Bloomberg Intel Senior MBS strategist

“Some lenders have reported an increase in prequalification inquiries in anticipation of a potential rate cut this fall, which could filter through to mortgage rates, but actual housing activity and mortgage borrowing demand remain at multiyear lows for now.”

Ellen Zentner, Morgan Stanley economist:

“The FOMC statement showed an important change in the characterization of inflation and the labor market, emphasizing risks to the dual mandate. Emphasis on the cooling labor market was an important shift to a more balance tone that we think sets the Fed up to cut in September.”

Anna Wong, Bloomberg Economics chief economist

“The policy statement contained minimal redlines, but they sent a loaded message to investors: Officials definitely aren’t ready to cut in July, and don’t want to reassure investors that a 25-bp cut is assured for September either – let alone the 50-bp cut markets lately have contemplated.

“In a hawkish move, the new statement kept language that the committee ‘does not expect it will be appropriate’ to cut rates until it has ‘gained greater confidence’ about the disinflationary trajectory. Still, by acknowledging the recent rise in the unemployment rate — and adding they’re now equally attentive to the full-employment leg of their dual mandate – the FOMC did keep hopes of a September rate cut alive.

“We think the main reason they sent only a minimal hint of an imminent cut is the amount of data yet to come before the September FOMC meeting — two more inflation and job reports — and the data could change considerably by then. The best time to definitively signal a September cut would be at Powell’s Jackson Hole address in late August, when he’ll have another month of jobs and inflation data in hand.”

Michael Gapen, Bank of America economist:

“I think this was the right incremental move. I think the Fed feels that it’s in a sweet spot right now, that the data is moving in its direction, so it’s getting closer. It just needs a little bit more and then that nebulous confidence may be there.”

Brian Coulton, Fitch Ratings chief economist:

“The key is starting to turn slowly as the Fed prepares to unlock the door to a rate cut in September.”

Source: BBG