“Everything comes in suggesting that this year starts off on a solid footing for growth”: Powell in the press conference.
By Wolf Richter for WOLF STREET.
The FOMC voted today to leave the Fed’s five policy rates unchanged, as widely telegraphed, despite enormous pressure by Trump to cut by a lot, after three rate cuts in a row in 2025 of 75 basis points combined, and after cutting by 100 basis points in 2024.
There were 2 dissenters of the 12 voting FOMC members, Stephen Miran and Christopher Waller, who wanted a 25-basis point cut. Waller also wanted to be Fed chair. These dissents that have been piling up at recent meetings are a breath of fresh air.
The statement, in a hawkish turn, shifted away from worries about the economy and the labor market, sees the economic growth now as “solid,” up from “moderate” at the December meeting, and undid the “shift in the balance of risks” at the December meeting where it had begun to seriously worry about the labor market. That’s no longer the case.
At the press conference, Powell added: “If you look at the incoming data since the last meeting, … everything comes in suggesting that this year starts off on a solid footing for growth.”
The FOMC left its five policy rates unchanged today:
- Target range for the federal funds rate: 3.5%-3.75%.
- Interest it pays the banks on reserve balances (IORB): 3.65%.
- Interest it pays on overnight Reverse Repos (ON RRPs): 3.50%
- Interest it charges on overnight Repos at its Standing Repo Facility (SRF): 3.75%.
- Interest it charges banks to borrow at the “Discount Window” at 3.75%.
Major changes in the statement:
The statement shifted away from worries about the economy and labor market in several places:
New: “The Committee is attentive to the risks to both sides of its dual mandate” (deleted the reference to rising “downside risks to employment”).
Old: “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”
New: “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent.” Deleted “in light of the shift in the balance of risks….”
Old: “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3 3/4 percent.”
Deleted the entire paragraph from the December statement: “The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.” This has already been implemented.
This was a no-dot-plot meeting – one of the four a year when the FOMC does not release a “Summary of Economic Projections,” which includes the “dot plot” that indicates how each FOMC member that day sees the development of future policy rates, inflation, GDP growth, and unemployment. The FOMC will release the next Summary of Economic Projections at the December meeting.
The whole statement:
Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Anna Paulson. Voting against this action were Stephen I. Miran and Christopher J. Waller, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting
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“Fed Refuses to Cut, Shifts Hawkish in the Statement”
Yet gold and metals surging. Way too much liquidity in the system, with speculation run amok. The FED never should have cut rates.
It’s a classic gold and silver mania. People make lots of money trading this.
Watch Chris’ video (Technical Traders) posted just above the comments. They’re big gold bugs, and they’re taking profits at this point.
It seems more related to turning fiat currency into toilet paper and furnace fuel. The FED and politicians destroyed the system. At the rate they are going parabolic, it suggests hyperinflation fears.
Yes, “the Fed never should have cut rates”.
The Fed made this mess, and they have to fix it, by adjusting rates to the expectations of the market over the last 10-15 years.
Powell needs to be removed from office and any one of the other directors that side with him.
Powell at the press conference:
“So, essentially the economy has once again surprised us with its strength. Not for the first time.”
“It is just the consumer is filling out surveys that sound really negative, not spending. So, there has been a disconnect for some time between downbeat surveys, and reasonable good spending data.”
Wolf, thanks for such a quick update on the FED’s statements. Truly valuable. I know that the rate decision was mostly expected, but still seems significant. I don’t know if the FED is data driven or not, but I think it was the right decision.
I noticed headlines the other day to the effect: “Home prices surge as Mrtg rates tumble” – referring to last month I think. Housing affordability will best be achieved by keeping Mrtg rates between 6-7% for 5 years. Just my opinion.
It is interesting to see Gold (+140 today) and Silver rising apparently detached from interest rate news. 1 hour to market close, maybe PM’s will fade into the close on the news…but the PM story seems to be detaching from interest rates and signaling something else.
BTC is subdued. If BTC is just a leveraged bet on Tech and if tech likes declining rates, we should see BTC fade over the next few days. I don’t know. Maybe it doesnt matter but it feeds the debate about just what BTC is.
Home prices did NOT surge “last month.”
Home prices were roughly flat year-over-year last month. Not seasonally adjusted: -0.3%. Seasonally adjusted: +0.2%:
Your move Mad King, let’s see what kind of crazy attack and investigation will come out of this hawkish stand and if they do end up pausing…ordering my popcorn now…
“There were 2 dissenters of the 12 voting FOMC members, Stephen Miran and Christopher Waller, who wanted a 25-basis point cut. Waller also wanted to be Fed chair”
Somebody is really trying hard to be the next constestant to The Apprentice….Waller just couldn’t wait to kiss that ring huh?
Jay said~“Growth in labor supply has came to a halt” “demand for labor came down a similar amount” ~ my knee jerk understanding to me, this sounds like we are depositing consumers or deporting growth in the economy. We are at equilibrium now, what will it look like when equilibrium breaks?
Wolf, I think you may have mistakenly posted the FOMC statement from December.
Good lordy, thanks. That’s what I get for having both statements open side by side.
Powell has lost control of the money stock. He needs to raise policy rates. But that will crash stocks.
These guys just matriculated at the wrong universities.
From the standpoint of the universal payment’s system, every time a DFI makes a loan to, or buys securities from, the non-bank public, it creates new money – demand deposits, somewhere in the system. I.e., deposits are the result of lending and not the other way around.
Almost as fickle as the weather in Vermont. Yet a bit more chilling. 🥶
Money & Banking 101. Too much money chasing goods & services.
Funded nearly $40 trillion treasury debt with fiat money and monetization of that debt.
This story will not end well. Listen to Ray Dalio’s speech at the WEF last week. Also his book & recent letter.
The statement sounded hawkish but certain comments in the interview sounded dovish to me at least.
He seemed to almost laugh at the idea of raising and rates (not that it’s currently needed but if inflation picks up we would) and seemed to imply there’d be reasons to lower in the second half of the year. He also seemed unconcerned about the 10 year saying the fed funds rate doesn’t impact that much, govt policy does. And lastly when asked about the K shaped economy he didn’t seem to find it problematic that the top half is the only people benefiting from this economic situation that he created by leaving rates at 0% through 2021 and didn’t acknowledge that the bottom half still thinks there’s inflation and is cited by Walmart as trading down in quality/brands to get by.
Powell can’t really give a honest opinion about the 10 year. Bessent would freak out! Powell has to talk up the nations book, the problem is manageable today but if we don’t change course we are screwed. The world knows we are not changing course. Sovereign. Debt is a circular jerk off with other nations. similar to the circular AI investment one AI company makes with the other Ai company The problem is if other nations stop participating in the circular refinancing of our debt or if the ROW slowly carves us out incrementally. If The $usd drop continues it will trigger stop loss in usd assets.
For instance SPY are up 16.39% YOY but the euro dollar is up 15.6% YOY after todays drop in the euro. The European who bought the spy a year ago have barely a return when converted back to their currency they are up 20% in the $dax. The stop loss trigger is close if the USD keeps falling, really close, the Europeans who bought the 10 ust bond have a giant loss! It may be Hedged but it’s still a loss outright. The value of the dollar is important to capital flow and it looks like capital is still leaving the dollar as a store of value.
“The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
Are you sure about that?! Are you sure???
Miran only wanted 25 basis points? That’s not going to go over well.