On the May FOMC

A big nothing. The message is wait and see in the face of rising uncertainty. The statement is hawkishly biased in the sense that incipient economic weakness is rationalized away, and inflation at-target is nevertheless called “elevated.” But it is dovishly biased in the sense that the upgrade to uncertainty is a precondition for forceful action as needed. The Fed put has already been deployed when quantitative tightening was virtually eliminated at the March FOMC. The year-end futures-implied finds rate is perfectly correlated to the stock market – when equities point to growth risks, the number of expected cuts rises in lockstep. The Fed put has been deployed and is ready to be deployed further.