The Federal Reserve left policy rates unchanged……..as expected by everyone. The Statement was essentially a copy and paste from the last meeting with the exception of a slight downgrade to the description of economic growth saying, “activity moderated in the first half of the year” from “continued to expand at a solid pace.” The only “drama” heading into 2:00pm was how many members of the Committee would dissent. Also not much of a surprise here with Fed Governors Waller and Bowman both preferring a 25bps rate cut, something they have been vocal about over the last month. This is the first time there have been two dissenters since 2020 and 1993 was the last time that two Governors didn’t side with the Committee. The market reaction was muted with equities essentially unchanged ahead of the press conference. The Chairman’s initial comments about tariffs were somewhat dovish, saying that a base case could be that the impact would be short-lived. However, much of the rest of the commentary leaned more “hawkish”, or really more patient, than the market had been hoping for. Overall, his commentary was very balanced, and he left the Committee with optionality as to timing but made it clear the “next steps we take are likely to be closer to neutral”.

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