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‘As Close as They Could Come to Cutting’: Wall Street Reacts to the FOMC

Vildana Hajric and Sarah Ponczek
(Bloomberg) -- While the Federal Reserve held rates steady Wednesday, investors said evidence is building for a reduction later in the year. The deletion of the pledge by policy makers to stay “patient” before economic data and estimates from eight of 17 members that the Fed funds rate would fall in 2019 supported risk assets including stocks.Here’s what investors and strategists had to say:Ellen Hazen, senior vice president and portfolio manager for F.L. Putnam“Reading the tea leaves, both they and the market are setting up for cuts to happen within the next few meetings. I wouldn’t be surprised if we saw it next meeting and they’re laying the groundwork in both the speeches and the language of the statement today.”Mike DePalma, managing director at MacKay Shields:“They pretty much did what the market was expecting. They removed the word ‘patient’ from the statement, which is what everyone thought they would do. That would be the way to signal dovishness. And Powell seems to have repeated everything he said in his speech two weeks ago. So frankly, I don’t think there’s any surprises here at all. If there is a surprise, it’s that there’s some differences of opinion on the Fed -- so they didn’t all vote the same way but eight of them thought rates would be lower by the end of the year. So that’s a lot.”Chris Zaccarelli, chief investment officer for Independent Advisor Alliance:“It looks like the Fed gave the market what it wanted by removing the word patient from the statement. It also showed with the dots that they are leaning very dovishly and July is absolutely on the table as the market was predicting.”Michael Gapen, Barclays Plc economist:“This is about as close as they could come to cutting today and in fact the fate of the members are forecasting it by at least year end. It’s walking it right up to the point and the markets will now expect action in July. Yes, the outcome of the G-20 meeting matters.”Ilya Feygin, senior strategist at WallachBeth Capital LLC:“The market had a slightly dovish reaction, liking the fact that ‘patient’ was removed, ‘act as appropriate’ was inserted. Eight officials support a cut by the end of the year, and nine by 2020, and importantly the long term neutral rate comes down 30 bps, and Bullard dissents to say ‘cut it now.’ The Fed also capitulated and lowered its PCE inflation forecasts. However, this does not change the overall picture too much.”\--With assistance from Elena Popina.To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.netTo contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris NagiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- While the Federal Reserve held rates steady Wednesday, investors said evidence is building for a reduction later in the year. The deletion of the pledge by policy makers to stay “patient” before economic data and estimates from eight of 17 members that the Fed funds rate would fall in 2019 supported risk assets including stocks.

Here’s what investors and strategists had to say:

Ellen Hazen, senior vice president and portfolio manager for F.L. Putnam

“Reading the tea leaves, both they and the market are setting up for cuts to happen within the next few meetings. I wouldn’t be surprised if we saw it next meeting and they’re laying the groundwork in both the speeches and the language of the statement today.”

Mike DePalma, managing director at MacKay Shields:

“They pretty much did what the market was expecting. They removed the word ‘patient’ from the statement, which is what everyone thought they would do. That would be the way to signal dovishness. And Powell seems to have repeated everything he said in his speech two weeks ago. So frankly, I don’t think there’s any surprises here at all. If there is a surprise, it’s that there’s some differences of opinion on the Fed -- so they didn’t all vote the same way but eight of them thought rates would be lower by the end of the year. So that’s a lot.”

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance:

“It looks like the Fed gave the market what it wanted by removing the word patient from the statement. It also showed with the dots that they are leaning very dovishly and July is absolutely on the table as the market was predicting.”

Michael Gapen, Barclays Plc economist:

“This is about as close as they could come to cutting today and in fact the fate of the members are forecasting it by at least year end. It’s walking it right up to the point and the markets will now expect action in July. Yes, the outcome of the G-20 meeting matters.”

Ilya Feygin, senior strategist at WallachBeth Capital LLC:

“The market had a slightly dovish reaction, liking the fact that ‘patient’ was removed, ‘act as appropriate’ was inserted. Eight officials support a cut by the end of the year, and nine by 2020, and importantly the long term neutral rate comes down 30 bps, and Bullard dissents to say ‘cut it now.’ The Fed also capitulated and lowered its PCE inflation forecasts. However, this does not change the overall picture too much.”

--With assistance from Elena Popina.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.