As expected, FOMC members held rates unchanged.  The U.S. economy remains solid (jobs and GDP) and especially so when compared to the rest of the world.  After a strong first quarter and a good 2018, due to the fiscal/tax boost, the economy is naturally reverting back to its trend growth (1.8% to 2.3%).  There are crosscurrents in the global economy with trade war/tariffs being the single biggest contributor to applying the brakes on growth.

Today’s Press Release removed “be patient” regarding the FOMC stance on interest rates.  This is being interpreted as the FOMC getting into a dovish position to lower rates in the next few meetings if the incoming information is deemed to threaten economic expansion.  In other words, the FOMC shall remain data dependent and take action when needed. (We are in the not too soon and not too much rate action camp.)

We believe the FOMC should not be proactive in its policy actions. Formulating policy decisions as new data present themselves is prudent and appropriate.  The likelihood of a rate cut has increased today but is still without certainty.  We believe the market will likely be disappointed with yield curve turning more positive in the back end.

Here is our language comparison to the June 2019 press release.