Bond Traders Have the Fed Firmly on Their Side
The central bank turned dovish, electing not to fight the massive move in the U.S. Treasury market.
It was probably not the outcome that Jerome Powell wanted but the one he felt he had little choice but to deliver.
Photographer: Mark Wilson/Getty Images
Faced with an extraordinarily difficult situation, Federal Reserve Chair Jerome Powell gave bond traders exactly what they wanted in the central bank’s latest monetary policy decision.
While the Fed left its benchmark lending rate unchanged in a range of 2.25% to 2.5%, changes to language in the Federal Open Market Committee’s statement, like removing the word “patient” and pledging to “act as appropriate to sustain the expansion,” pointed to reducing interest rates in the near future. One voting member, St. Louis Fed President James Bullard, even dissented in favor of a cut. On top of that, the “dot plot” showed the median projection among policy makers was for lowering interest rates at some point before the end of 2020.