Fed Keeps Fed Funds Rate At 2.50%, Tepid On More Balance Sheet Normalization

Today, The Federal Reserve announced that their target rate remained at 2.5%.

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This was expected.

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But on further balance sheet unwinding, Fed Chair Thurston Powell III had this to say:

“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,”

Wednesday’s statement from the policymaking Federal Open Market Committee struck a more tepid approach.

The committee lowered its assessment of economic growth from “strong” to “solid” and noted that its inflation gauges “have moved lower in recent months.”

*Fed removes reference to further gradual rate increases
*Fed says it plans to continue with current floor approach
*Fed says it’s prepared to adjust balance-sheet normalization
*Fed reiterates federal funds target is primary policy tool
*Fed says economic activity rising at solid rate, jobs strong
*Fed says labor market strengthened, unemployment remained low
*Fed says spending grew strongly, investment moderated
*Fed says core and headline inflation remain near 2%

The reaction on the Dow? Investors seem to like Powell’s tepid message.

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And yield on 10-year Treasury Notes fell on the message.

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Fed Chair Thurston Powell III with wife Lovey (aka, Janet Yellen).

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