No Change

This morning’s US Federal Reserve meeting was billed as the must see event of the decade, but in the end it was a bit of a fizzer, with policy left on hold and the Fed’s so called “dot plot” projections for the Fed Funds rate lowered by 25bps across the board. In hindsight, I’m sure many a trader is now ruing their decision to get out of bed and come in early (we had a full complement on deck here at 5.45am!).

But hang on – not so fast. A lot did happen, and when you have an event that is painted as the must-see thing, and then you don’t see anything, that has news content.

For one, we know that the Fed is still keen on lifting the Fed Funds rate, and at the press conference later on, Yellen specifically said that October was a possibility, and that they expect to start hiking this year.

So in terms of timing, we are talking about a slight delay, provided things evolve as expected. Beyond the sticker shock of the no-go decision, the implications for this are very limited, and should really only affect the very short end of the US yield curve.