Fed Holds The Course, Prepared To “Increase Or Reduce Purchases”

With the equity market dropping rather notedly into the release of the FOMC decision, chatter was that the ‘early release’ button had been hit, but…

• *FED SAYS LABOR MARKET HAS SHOWN SOME IMPROVEMENT
• *FED SEES `DOWNSIDE RISKS’ TO ECONOMIC OUTLOOK
• *FED SAYS IT’S `PREPARED TO INCREASE OR REDUCE’ PURCHASES

Which suggests some management of expectations… but more of the same and no big surprise. The only real difference from the March statement, as shown below, is the following sentence added in the fourth paragraph:

The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.

Market stance pre: ES 1582, 10Y 1.62%, Gold, $1450, WTI $90.65, EUR 1.3200

Since the close of the last FOMC decision, the US long bond has gained 4.5% and is the big winner, with the S&P up only 1.8% (and gold and silver the biggest losers)…

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