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

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA 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 CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.