The Fed delivered another large 75 basis point rate hike this week, bringing the fed funds rate to what is generally seen as its neutral level of two and a half percent. Unlike in June, this was a unanimous decision and it was well in line with what committee members had signaled ahead of the meeting.
There were no new economic forecasts this time around and Chair Powell made it a point to not signal any specific guidance in regard to the September meeting. Instead he emphasized data dependency, which we think makes a lot of sense in the face of softening demand and broadening evidence of a slowdown.
In fact, we believe that by the September meeting, the data would support a much smaller move, perhaps as little as 25 basis points. It was too soon today for Chair Powell to signal or even hint of such a change in pace, but we will be very closely watching the Jackson Hole retreat for signs that such a shift is indeed coming.
