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Daily State Of The Markets: All About The Fed, Until It Wasn't

David Moenning profile picture
David Moenning


  • Wednesday's action was all about the Fed, right up until it wasn't.
  • After the release of the FOMC statement, stocks enjoyed a sigh-of-relief rally.
  • But then fresh trade headlines hit.

Wednesday's action in the stock market was all about the Fed. Well, right up until it wasn't, that is.

As expected, the FOMC (Federal Open Market Committee) left the target range for the Fed Funds Rate at 1.50% to 1.75% yesterday. To be clear, no one expected Jay Powell's gang to make any changes Wednesday. However, analysts were looking for changes to the Fed's statement that accompanied the rate announcement.

Although one does have to read the tea leaves in order to come to a conclusion, it does appear that Powell & Company see economic activity and inflation heating up more than previously thought. In the statement, the FOMC noted that on average, job growth and business investment both remain strong. For anyone who has been paying attention, this wasn't exactly news.

However, there were two changes to the statement that are worth noting. First, was the description of inflation expectations. Last month, the Fed projected that inflation would be moving toward the 2% target sometime this year. However, in yesterday's statement, the projection was moved up a bit to "in the coming months." This is obviously in reference to the recent PCE data, which hit the 2% level on a year-over-year increase.

Powell also introduced a new word to the statement in relation to inflation risks. While the FOMC has been concerned for quite some time that inflation was running too low (nobody wanted to see a Japan-style deflationary cycle), the statement now describes the risks (too low versus too high) of inflation as being "symmetric."

From my seat, this is a clear acknowledgement that (a) the Fed now needs to at least pay attention to the possibility of inflation running too hot and (b) Powell's group is planning on staying the course of 25 basis point rate hikes at every other meeting until

This article was written by

David Moenning profile picture
David Moenning is founder and Chief Investment Officer at Heritage Capital Research, a Registered Investment Advisor. Heritage is an independent, privately owned, investment management firm located in the Denver area. Mr. Moenning has more than 33 years of portfolio management experience and focuses on a risk-managed approach to capital markets via modernized portfolio development and dynamic adaptation to ever-changing macro environments. Most recently Chief Investment Officer for a $1.3 billion RIA firm.

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