For the first time since January 2023, the FOMC unanimously hiked rates by 25bps, which the Committee said “will support a timelier return” of inflation to their stated 2% goal (more on that in a minute). The outcome was widely expected though the unanimous support was somewhat surprising. Once again, the statement followed Warsh's principle of brevity, with no major changes to the description of the economy, while stressing “The Committee will deliver price stability.”

There was broad support for an additional hike with 16 of the 18 officials seeing at least one more by year end, with four of them penciling in 50bps of increases (i.e. 2 hikes). The surprise comes in 2027 with the median dot holding steady at 4.1%- despite core median core PCE expectations of 2.5%. However, it also produces a "higher for longer" outcome.

The S&P had a modest gain heading into the decision. Equities initially fell on the release, then rallied back early in Warsh’s presser. That didn’t last long though as stocks turned decidedly lower in the middle of the Q&A. The S&P fell as low as 7510, tagging the 100d ma, before bouncing into the close to end the day down 0.5%, at ~7550. The Russell 2000 ended the day inline.

The equity weakness came as yields sharply reversed. The 2y yield was down ~5bp before the release. However they moved higher after the release and didn’t look back, ending the day up 7bp, a ~14bp reversal from the lows. The 10y and 30y also ended the day well off their lows but finished largely unchanged on the day. The Dollar Index rallied strongly, driving back up through 100.