The members of the FOMC voted on Wednesday, May 3 announced it would raise rates by +25 bp, as most on the Street predicted. The vote was unanimous. 

In its previous rate hike on March 22, the Fed wrote that “the committee anticipates that some additional policy forming may be appropriate.” This time, that phrase was modified–removing the words, “the committee anticipates.” Fed Chair Jerome Powell highlighted this, describing it as a “meaningful change.”

Our analysis 

The stock and bond markets had immediate and contrasting reactions to the announcement. During the press conference by the Federal Reserve Chair that customarily follows such announcements, the stock market dropped sharply, specifically during three points of Jerome Powell’s remarks.

Around 2:40 p.m. (Eastern time), Powell noted that “A decision on a pause was not made today.” At 3:06 p.m., he noted that “inflation is going to come down not so quickly  … it will not be appropriate to cut rates,” and at 3:18 p.m., he disclosed that “Support for the 25bp rate increase was VERY strong across the board,” admitting that Fed officials “did talk about pausing, but not so much at this meeting.” While being mindful of the “post hoc ergo propter hoc” fallacy, t...

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