Stock Market Update

[BRIEFING.COM] When the Federal Open Market Committee (FOMC) met in June, the vote to leave the fed funds rate unchanged at 3.50-3.75% was unanimous (12-0). Today, the FOMC again voted to leave the target range for the fed funds rate unchanged at 3.50-3.75%, but there were three dissents.

Cleveland Fed President Hammack, Minneapolis Fed President Kashkari, and Dallas Fed President Logan all preferred a 25-basis point increase in the target range for the fed funds rate.  

There were no dissents among the Fed governors, one of whom was the former Fed chair. That there was dissent at this meeting is not a real surprise. The aforementioned presidents had previously expressed their concerns about elevated inflation rates; moreover, the fed funds futures market showed an approximately 30% probability of a rate hike at today's meeting.

Alas, there was no hike. Notably, there was virtually no change to the wording of the policy directive either. It was identical to the June directive, with the exception of the opening line detailing the breakdown of the vote.

The concluding line remains: "The Committee will deliver price stability." That is an earnest pursuit, yet the Treasury market will tell everyone if it finds that stance credible. It has had some doubts given the rise in energy prices, the huge increases in memory costs, and rising food costs. 

The 10-yr note yield is up about 20 basis points since the last FOMC meeting in June, so it can be said that it is not resting assured—not yet, anyway—that price stability will be delivered. Today's decision may have met the stock market's prevailing expectation, but it is the Treasury market the FOMC needs to satisfy, and for now, it still looks like it can't get no satisfaction.

The 10-yr note yield is up four basis points to 4.64%, little changed since the identical directive for the July meeting was released.