Fed Keeps Interest Rates Unchanged and Buys Treasury Bills

Summary

The Federal Reserve maintained its benchmark interest rate in the 3.5%-3.75% range, halting a series of three consecutive rate cuts.AASTOCKS+ 2 The decision was passed with a 10-2 vote.FX678 The policy statement reflected a more optimistic economic outlook, describing activity as expanding at a “solid” pace and removing language about downside risks to the labor market.AASTOCKS+ 2 This signals a more balanced approach to the Fed’s dual mandate.Zhitong+ 2 While inflation is still considered “slightly high,” the committee’s tone suggests no immediate urgency for further cuts, with markets now anticipating the next move is unlikely before June.AASTOCKS+ 4

Impact Analysis

The hold itself was no surprise, but the language shift is a clear hawkish signal. They’re basically taking a victory lap on the soft landing, upgrading their economic view to “solid” and dropping the dovish language about labor market risks.AASTOCKS+ 2 This isn’t just a pause; it’s a pivot to a patient, data-dependent stance. The bar for further cuts is now significantly higher.

Don’t get sidetracked by the two dovish dissents; the core committee is comfortable on the sidelines.FX678+ 2 They’re telling the market to cool its jets on rate cut expectations. While pricing has already pushed cuts out past June, this cements the idea that the Fed is in no hurry.Sina Finance+ 2 This should support the dollar and put a floor under yields. I’m wary of long-duration assets here. The real risk is the market is still underestimating how long the Fed is willing to wait. This favors cyclicals over rate-sensitive plays.