As expected, the Feds held rates steady for the fourth straight meeting, according to the release from the Federal Open Market Committee.
- “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.”
Changes. While the rate statement was not getting much attention. The changes from December’s statement did not go unnoticed. The committee omitted:
- “Reference To Sound And Resilient US Banking System”The U.S. banking system is sound and resilient.”
- “Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.”
Inflation. The committee also omitted the phrase “The committee remains highly attentive to inflation risks.” However, the January release did note “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.”
Going Forward. The Committee’s stance on looking ahead did not change from December. “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.”
The Cut. Heading into Wednesday’s release the markets had the chance of a rate cut at March’s meeting at 50%. However, Chairman Jerome Powell seemed to throw some very cold water on that idea during his press conference. When asked by Edward Lawrence at Fox Business about whether it was premature to consider rate cuts around the corner Powell responded, “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting … but that’s to be seen.”
As noted by Conor Sen, Powell didn’t drop this bomb until 30+ minutes into his press conference, and even the question itself was not specifically asked about the March meeting. Why did he wait so long to throw cold water on this idea? Ben Casselman, at the New York Times, has a theory “My take on this, after listening back through again: I think Powell planned to throw cold water on March but expected someone to ask about it more directly than they did, and then found himself halfway through the presser looking for an opportunity to slip it in.”
BOTTOM LINE: It seems highly unlikely that we will get a rate cut in March but Friday’s jobs report could change that plan if we get a significantly lower number than projected (+180k) or a negative print.