'Hawkish' FOMC Signals Rate-Hike-Trajectory Unphased By Market Volatility

Amid expectations of a nothingburger FOMC statement, The Fed delivered, leaving rates unchanged and signaling "further gradual rate increases ahead".

However, they did note, as expected, a slight downgrade on business investment to "moderated from its rapid pace earlier in the year," but positively noted that household spending "has continued to grow strongly".

There were no changes to communications policy, the appropriate size of a normalized balance sheet, technical issues related to interest on excess reserves (IOER) or the extent to which the fed funds rate may need to overshoot neutral in the current cycle.

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Gold was the best-performer since The Fed hiked rates in September and stocks the worst...

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And although most economists forecast 'zero' chance of a rate-hike today, Fed Funds imply a modest 13% chance the Fed would surprise - they didn't.

Most eyes were on the statement looking for any cracks in the hawkish incessant rate-hike-trajectory put forward by Jay Powell as the market remains convinced The Fed is wrong...

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Financial Conditions have tightened dramatically since the September rate-hike... in fact the biggest tightening of conditions since the first hike in Dec 2015...

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Before today's statement, markets implied around a 78% chance of a Dec rate-hike (and a conditional-on-December-hike 47% chance of a hike in March), after the statement, that barely moved after the statement.

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Here is what Goldman was expecting - very little change to the statement...

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Full redline of FOMC Statement:

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President Trump will not be happy...

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