The Federal Reserve changed "solid" to "strong." That's the headline. Wall Street is treating it like a ransom note.
Economic activity was "expanding at a solid pace" in September. Now it's "strong." Same economy. Better adjective. Somewhere, a copywriter at the Federal Open Market Committee got a raise.
The policy sentence swapped "raise" for "maintain." Rates stay at 3.75% to 4%. The Fed also deleted a sentence explaining the September hike. Apparently the explanation expired.
Two members dissented. Lisa Cook and Beth Hammack wanted another quarter-point hike. The statement doesn't say why. It just says they "preferred" it. Like ordering the fish.
The vote was 10 to 2. Hammack also dissented in July, so she's basically the office smoke detector. Chair Kevin Warsh promised to "deliver price stability, no ifs, ands or buts." Inflation is above 2% and has been for more than five years. That's a lot of buts.
Now the retail traders. They will read the statement forty times. They will screenshot the "solid" and "strong" comparison. They will post a chart with three arrows and a ruler. One of them will conclude that the Fed is "signaling." The Fed signaled that it needs more information. So did you, Kevin from the options chat, but nobody gave you a press conference.
Treasury yields moved a basis point or two after the release. The 10-year went from 5.0196% to 5.0341%. Your entire thesis lives inside that 1.45 basis point gap.
The chart did not care what the statement said. The chart never does. It just draws a line and lets you embarrass yourself around it.
The Fed spent two days deliberating to swap a verb and an adjective. You spent two days deliberating over whether to buy calls on it.
Both of you are paid in adjectives. Only one of you is paid.
Photo by Joshua Hoehne on Unsplash
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