Fed remains on hold; Cuts IOER; Maintains patient pledge

The Fed kept rates interest rates steady and stuck to the patient script.  The Fed reiterated that they will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.  The Fed did not give any queues to any policy moves or reactions to the recent run of low inflation.

A technical adjustment was delivered with the Fed lowering the IOER rate 5 basis points to 2.35%, a tool used to control the benchmark rate.  The IOER should not be interpreted as a dovish signal.

The dollar extended its declines while Treasuries extended gains on the day following the uneventful FOMC decision.

The US economy is at full employment and growth still looks fine, so rate cut bets at this late stage in the cycle might start seeming unusual.  But that is where we are.  Fed fund futures are still pricing in a 50/50 chance they will cut at the September meeting.

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya