Fed Sees No 2019 Hike, Plans September End to Asset Drawdown (Big, Bad Jay!)

“Big Bad Jay” Powell today announced today that there would be no more rate cuts in 2019 and balance sheet shrinking would halt in September.

Federal Reserve officials scaled back their projected interest-rate increases this year to zero and said they would end the drawdown of central bank bond holdings in September sending benchmark Treasury yields to the lowest level in more than a year and bolstering market bets on a rate cut in 2019.

The median rate projection of Fed officials compared with two hikes in the December forecasts, which spooked investors at the time. In its statement following a two-day meeting in Washington, the Federal Open Market Committee repeated January language that it will be “patient” amid “global economic and financial developments and muted inflation pressures.”

“Patient means that we see no need to rush to judgment,” Fed Chairman Jerome Powell said in a press conference after Wednesday’s decision. “It may be some time before the outlook for jobs and inflation calls clearly for a change in policy.”

The Fed’s signal that it will keep interest rates on hold for the full year reflects concerns that economic growth is slowing, lower energy prices are weighing on inflation and risks from abroad are dimming the outlook. The projections go further than the one-hike forecast analysis.

Here is today’s FOMC Dot Plot.

Screen Shot 2019-03-20 at 3.08.18 PM

Here is yesterday’s FOMC Dots Plot.

dotplot

On the announcement, 10-year US T-Notes yields dropped 7+ basis points.

gt100320postfed

And the 2-year and 5-year Treasury Note yields are BELOW The Fed Funds Target Rate!

fed25

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.