After much angst - the FOMC statement said: 'risks to achieving the Fed's dual mandate moved toward better balance'... hah.. that seems laughable, or optimistic, but that's a good tone for now. And the market welcomed that.

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Watch oil prices of course, while the economy is 'fairly good' but prices higher all around, so there's a debate about 'stagflation' or not. The Fed wants to be in a position to 'eventually' cut rates, so they're not sounding 'too' hawkish.

Chairman Powell basically said they'll hold rates at this higher level (not really high based on 'historical' norms business deals with, but high relative to those too-low-for-too-long rates during and after pandemic)...until inflation's pace is lowered to their 2% goal. Basically that says rates will stay lateral for now.

Slowing the pace of balance sheet run-off is a gradualist move and smooths the stresses to the money markets. Basically, this leaves the Fed sort of on the sidelines and trying not to ruffle things too much. Their policy is somewhat restrictive and weighs on demand regardless, but of course not so much as in the wake of crazy stimulus spending after Covid (largely unaccounted for too).

Market X-ray: 

All of this comes down to 'when' the Fed will feel confidence to cut rates, and nobody is anticipating that immediately, barring an exogenous shock to the system that compels doing so (at time glance at Japan for clues to what happens when control is lost by monetary authorities).

This Fed is in a 'holding pattern', and not really acknowledging how foggy this is with regard to inflation, based on the term 'better balance' as a perspective. This is or will remain a choppy environment, but isn't exactly a 'lower volatility' environment, as some suggest. It is overall, but feels jittery, plus it's May.

Incidentally we got the 'Jolts' numbers, which suggests a lower hiring rate, and lower 'jobs openings'. So that reduces labor market tightening concerns, and it's a slower-turnover jobs market which reduces wage growth pressures in a sense, though you know how impossible it is to reduce general wages.

Basically, the data combined with Oil prices is cooperating with Fed objective mandates, even though it's slow as molasses to get any sort of inflation drop.

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