On the November FOMC

Critical changes to the statement language – downplaying strong Q3-2023 real GDP growth and the strong September payrolls report – and explicitly citing the effects of tightening financial conditions – absolutely takes a December rate hike off the table. This is an embarrassing concession considering that one more hike was baked into the “dot plot” just one meeting ago. In the presser Powell was at pains to underplay all this, saying repeatedly that rate cuts were not even discussed at the meeting. But of course they were – they are already reflected in the “dot plot” and markets expect, and have always expected, even more. We think markets have underestimated the dovishness and bullishness of this meeting.