US | Fed is done if conditions allow them to be done

Summary

For now, the FOMC will continue with a “meeting-by-meeting” strategy until they are confident that they have achieved a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time.

Key points

• Key points:
• The FOMC unanimously decided to hold the fed funds rate steady at its current 5.25-5.50% 22-year-high target range for a second consecutive meeting.
• Last week’s surprisingly 4.9% 3Q23 GDP growth figure drove the Committee to upgrade the recent pace of economic activity to “strong” instead of “solid.”
• This hawkish tweak was partially offset by the addition of “tighter financial conditions” as an additional factor “likely to weigh on economic activity, hiring, and inflation.”
• Regarding the recent rise of long-term yields, Chair Powell refused from ceding control of financial conditions to market shifts that might not prove to persist.
• We think the Fed started to pave the way for a gradual change of tone in the following meetings in which a definitive pause will be effectively signaled.

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