1/ SSR FED THREAD

Federal Reserve officials left interest rates unchanged and pointed to improvements in the US economy as they signaled a more cautious approach to potential future adjustments.

The Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Governors Christopher Waller and Stephen Miran dissented in favor of a quarter-point reduction.

In a post-meeting statement, policymakers said “job gains have remained low, and the unemployment rate has shown some signs of stabilization.” Officials also dropped language pointing to increased downside risks to employment that had appeared in the three previous statements.

The upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from the Trump administration. Heading into the meeting, investors saw another cut as unlikely until at least June.
The S&P 500 and Treasuries remained lower while the dollar strengthened.

Wednesday’s decision was widely expected after policymakers lowered interest rates at three consecutive meetings in the closing months of 2025. Based on rate projections issued in December, most officials see the Fed cutting again later this year. But given concerns over still-elevated inflation and signs of stability in the labor market, several policymakers recently indicated they saw no immediate need for an additional reduction. 2/ Fed removes language from statement that had noted “downside risks to employment rose in recent months”

Fed upgrades view of economy to say available indicators suggest economic activity “has been expanding at a solid pace,” and repeats inflation “remains somewhat elevated”

Fed tweaks description of the labor market, noting “job gains have remained low” and the jobless rate has “shown some signs of stabilization”

1/ Fed Thread Good afternoon! 2/ Hawkish statement, speech has begun 2:30 ET

https://x.com/SpecialSitsNews/status/1884678452172775876

1/ FED THREAD: HAWKISH CUT, 25 bps, but only see 50 bps cuts next year...

RAISED INFLATION FORECAST FROM 2.1% TO 2.5%

10 YEAR UP 5 BPS, DOLLAR STRONGER 2/ DOLLAR RISES TO HIGHEST SINCE NOV. 2022 AFTER FED DECISION (NEGATIVE FOR EM CURRENCIES, METALS, GOLD, ENERGY COMMODITIES)

FOMC MEDIAN 2025 PCE INFLATION FORECAST RISES TO 2.5% VS 2.1%

FED LOWERS OVERNIGHT REVERSE-REPO RATE TO 4.25% FROM 4.55%

FED SAYS CLEVELAND'S HAMMACK DISSENTED IN FAVOR OF NO RATE CUT

BRAZILIAN REAL EXTENDS LOSSES TO 2%

FED TO ASSESS DATA REGARDING EXTENT, TIMING OF FUTURE MOVES

1/ SSR Mega Fed Thread (Meeting: 2:30pm ET)
- 25 bps as expected
- "Goals remain roughly in balance", similar language as last meeting
- Labor market conditions have generally eased
- “The tweaks to the inflation language make this statement somewhat less dovish than the last one, and it looks like the Fed is cracking open the door to a December pause.
- On the balance sheet, the statement simply says the FOMC will continue reducing their holdings of Treasury securities and agency debt and agency mortgage‑backed securities.
2/ Former Fed Vice Chair Rich Clarida tells Bloomberg TV the “Powell Fed” will just keep doing what they’re doing despite external events.

He adds that financial conditions may be an input to policy but shouldn’t be too much of an influence given the day-to-day gyrations.

1/ FED THREAD (Dovish 50 bps cut)

Fed cuts 50 bps, 11 voted for it; Bowman voted against

First meeting with dissenting

Steepening of 2s10s and 2s30s

Still have news conference 2/ $IWM rallying, more dovish than expected (strongly committed to maximum employment)

“The committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Fed said in a statement, adding that officials are “strongly committed to supporting maximum employment” in addition to bringing inflation back to their goal.

1/ FOMC Thread:
- Fed holds rates at 5.25%-5.5%
- Signal just one cut 25 bps in 2024 vs 75 bps
- Median 2024 Core PCE inflation est up to 2.8% vs 2.6%
- Median forecast shows 100 bps cut in 2025 vs 75 bps 2/ Fed Economic Forecasts (New)
- 2024 median GDP growth 2.1% vs 2.1%
- 2025 median GDP growth 2.0% vs 2.0%
- 2026 median GDP growth 2.0% vs 2.0%
- Longer run PCE inflation median at 2.0% compares to previous forecast of 2.0%
- 2024 median PCE inflation 2.6% vs 2.4%
- 2025 median PCE inflation 2.3% vs 2.2%
- 2026 median PCE inflation 2.0% vs 2.0%
- 2024 median core PCE inflation 2.8% vs 2.6%
- 2025 median core PCE inflation 2.3% vs 2.2%
- 2026 median core PCE inflation 2.0% vs 2.0%
- Longer run Fed funds median at 2.8% compares to previous forecast of 2.6%
- 2024 median Fed funds 5.1% vs 4.6%
- 2025 median Fed funds 4.1% vs 3.9%
- 2026 median Fed funds 3.1% vs 3.1%

1/ Jamie Dimon's 61 page annual shareholder letter is finally out for FY2023! $JPM
-Says Federal deficit is a real issue hurting business confidence (govt spending could keep rates high)
-A rate spike is very possible with stickier inflation
-US economy resilient so far with consumer spending, but the economy has also been fueled by government deficit spending and past stimulus
-Market is pricing in 70-80% chance of a soft landing/no landing...Dimon thinks that is too high
-Inflation resurgence, political polarization are risks for this year (Ukraine, Middle East, China)
-AI may be as impactful on humanity as the printing press $NVDA $AMD $MSFT $GOOG 2/ The bank is reporting 1Q earnings on 4/12/24, but earnings over the past 20 years have been incredible

1/ FOMC Thread: increases Core PCE expectation for 2.6 vs 2.4%
-SEP is the same for 2023, but expect Fed Funds to stay higher in 2025 (3.75% 2/ FOMC median rate forecast for 2025 rises to 3.9% from 3.6%

Rates unchanged

SSR FOMC Thread (1)
Fed: risks to the economy are balanced, but don't expect cuts soon
-No QT changes imminent, $60bn on treasury cap and $35bn on MBS continues
-Don't see cuts until more confident inflation nearing 2%
-Holds benchmark rate in 5.25-5.5% range 2/ Rates to stay at 22 year highs in near term
-Wage inflation probably 1% higher than Fed would like in the long term
-ECI probably a bit too hot for the Fed as well
-In the wake of 4Q GDP rising more than forecast, FOMC says economic growth is solid and job gains remain strong

1/ FOMC minutes were not dovish, despite confirming rates near peak 2/ rate of job openings to seekers still at 1.4, but down from 2.0 in 2022

No recession in sight yet

Market is pricing in 6 to 7 cuts, which is excessive

Fed SEP showed 3 cuts (up from 2)

SSR FED THREAD

1/ Fed holds rates at 22y high, as expected 2/ “Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the US central bank’s policy-setting Federal Open Market Committee said in a post-meeting statement published Wednesday in Washington, adding the word “financial” to language that previously referred only to credit conditions. “The extent of these effects remains uncertain,” the Fed said, repeating that it “remains highly attentive to inflation risks.”

Reasons why individual investors tend to gamble 🎰 in the market, instead of making decisions using risk reward and sound capital allocation framework:

1/ dopamine release from gambling, which the 🧠 gets used to over time, resulting in bigger & bigger bets (and potential loss) 2/ lack of knowledge or experience: retail investors may not have deep understanding of how market works or how to properly analyze & evaluate investment opportunities. Instead, may make decisions based on squiggly lines, speculation or intuition rather than financial analysis

1/ What the banks are doing is taking their collateral and exchanging it for cash at the discount window to fulfill deposits. This does not create new money in the system. It is just a temporary fix for liquidity. Not QE.

$jpm $bac $gs $ms $c $frc $pacw 2/ Fed is taking in the bonds as collateral and that is what is inflating the Fed’s balance sheet. However, these are just being held as collateral against the loan given to the Banks and therefore, they will be returned as the Banks pay off the loan.

1/ Fed presser summary
- fed due to everything to support banking system after recent volatility
- inflation remains to high
- gdp rising at below trend pace
- consumer spending recovered, could be weather
- housing sector weakening
- business fixed investment slowing 2/ GDP growth risks weighted to downside 0.4% this year, 1.5% next year
- labor market very tight
- labor force participation up
- job vacancies very high
- expect supply/demand in labor to normalize over them
- 4.5% unemployment end of this year in SEP and 4.6% next year

1/Powell thread 2/7 interview:

Powell did not expect this labor report to be this strong...

Why rates higher for longer... twitter.com/i/web/status/1… 2/ Could raise rates more if need be, 7 governors in board

Nominated by President and confirmed by Senate

12 Reserve Bank Governors; vote on rotating basis, except NY, which votes every year

19 people sit on the Board

1/ The banks, they don't care, they're ignoring the SIGNS
They're making their forecasts, but they're not in LINE
With the reality of the S&P 500
They're pretending everything's just FINE

$C $GS $BAC $WFC $DB $CS $UBS $MS 2/ But we know the truth, we see the DATA
Earnings recession, it's not just a MATTER
Of opinion, it's there in black and WHITE
But the banks, they're ignoring it, out of sight, out of SIGHT

According to a Dallas Fed paper published this afternoon, U.S. housing prices could fall 15-20% in reaction to higher interest rates... 2/ "U.S. house prices appreciated a remarkable 94.5% from 1Q2013 to second quarter 2022—a 60.8 percent rise after adjusting for inflation. The magnitude of the increase is even larger than that of the preceding housing boom, from first quarter 1998 to second quarter 2007."

1/ Fed's Waller said “we’ve still got a ways to go” before Fed stops raising interest rates, despite good news last week on CPI.

While officials could moderate size of hikes to 50 bps at their next meeting or the one after that -- Waller cautioned not close to a pause. 2/ Waller speaking in Sydney;
-Rates can still go above 5%, depends on inflation
-Markets are way out in front [of reality]
-Household balance sheets in good shape
-We are barely in restrictive policy territory (HA!)
-Will slow pace of QT when get closer to 10% of reserves

1/ Powell: real GDP has slowed considerably
-lower real disposable income
-housing has weakened considerably due to high mortgage rates
-but labor market tight, wage inflation moderate
-labor market out of balance
-participation little changed
-PCE 6.2%, Core PCE 5.1% too high 2/ High inflation imposes significant hardship as erodes purchasing power (food, energy, transportation)
-Strongly committed to 2%
-Continue to significantly reduce balance sheet as well
-Raised 3.75% this year
-Ongoing raises will be appropriate, so its sufficiently restrictive

1/ For those who don't know the different between a Treasury buyback (being discussed by TBAC) and QE, A Treasury buyback is a purchase of US Treasury debt by the Treasury and subsequent cancellation of that debt. A buyback is a consensual transaction, thus differs from 2/ a redemption at maturity or exercise of a call option. Over the past century, the Treasury has only instituted two buyback operations, the first series in the 1920s and the second during 2000-2002.

1/ OPEC THREAD
The OPEC+ group of oil producers will consider cutting output by more than 1 million barrels a day when it meets in Vienna on Wednesday, according to delegates. $USO $UCO $XLE $XOP $OXY $XOM $BP $CVX $CVE 2/ A larger-than-expected reduction would reflect the scale of concern that global economy is slowing fast in the face of rapidly tightening monetary policy. A stronger USD has also weighed on prices. Final decision on size of cuts won’t be made until meeting, delegates said.