Economic Growth and Outlook

  • Progress: Acknowledges significant progress in the economy.
  • Uncertainty: Highlights the uncertain path forward and notes the economy is broadly normalizing, driven by post-pandemic healing and labor market recovery.
  • Subdued Activity: Points out subdued activity in the housing sector despite overall economic growth.

Inflation

  • Easing Yet Above Target: Inflation has eased notably but still remains above the 2% target. Low inflation readings in the latter half of the year are welcomed, yet continuous evidence is needed for confidence in returning to the target.
  • Continuous Monitoring: Stresses the need for greater confidence and more evidence that inflation is on a sustainable path back to 2%.

Monetary Policy and Rate Decisions

  • Tightening Over Past Two Years: Monetary policy has significantly tightened to combat inflation.
  • Policy Rate at Peak: Suggests the policy rate is likely at its peak, indicating a shift towards potentially reducing rates if the economy evolves as anticipated.
  • March Rate Cut Unlikely: Explicitly mentions that based on the current meeting and economic data, a rate cut in March is not the base case, emphasizing a cautious approach.

Employment and Labor Market

  • Tight Labor Market: The labor market remains tight with strong job gains and labor demand exceeding supply, suggesting robust employment health.
  • Wage Normalization: Indicates wage normalization and labor rebalancing are ongoing processes, expected to take time to fully stabilize.

Balance Sheet Reduction

  • Successful Runoff: Notes the balance sheet runoff has been proceeding well, with plans for more in-depth discussions on its pace in future meetings.

Rate Cuts and Policy Adjustments Outlook

  • Future Adjustments: While open to reducing rates sometime this year, emphasizes the need for more data to ensure inflation is moving sustainably down.
  • Risk Management: Describes being in a risk-management mode, carefully weighing the timing of any policy adjustments to avoid derailing inflation progress or harming the economy.

Additional Insights

  • Anecdotal Evidence: Expresses value in anecdotal data, observing that activity is picking up marginally.
  • Economic and Inflation Confidence: Though there is growing confidence in inflation data, stresses the importance of ensuring that inflation reduction is done in a sustainable manner.

Looking at the markets:

Stocks before rate decision and current levels:

  • Dow was up 17.23 . Now down -305 points or 0.79%
  • S&P was down -34.54 points and is now down -74.37 points or -1.51%
  • Nasdaq was down -185.70 points and is now down -321.65 points or -2.08%.. The decline is the largest since October 26 when prices fell -1.98%

US yields before and after:

  • 2 year yield moved from 4.249% to 4.276% currently
  • 5-year yield moved from 3.887% to 3.909% currently
  • 10 year moved from 3.965% to 3.986% currently
  • 30-year yield moved from 4.2119% to 4.229% currently

Currency pair technicals:

EURUSD:

EURUSD

USDJPY:

USDJPY

GBPUSD:

GBPUSD