Stock Market Update

[BRIEFING.COM] The FOMC decision everyone was waiting for—and expecting—is out. The FOMC voted to raise the target range for the fed funds rate by 25 basis points to 3.75-4.00%. The surprise dynamic of that decision is that it was a unanimous vote (12-0).

That unanimity implied Fed Chair Warsh voted for the rate hike, as did his predecessor, Jerome Powell. There will be a natural tendency to highlight that agreement as a strong signal that Mr. Warsh is not being steered by politics. We'll let others argue that point. We are simply explaining how the market might be inclined to read that 12-0 vote.

The directive called attention to the uncertainty driven by geopolitical developments, as well as to the fact that domestic spending has been resilient. The driving principle, though, is that "inflation remains elevated." The directive concludes with a direct message: "The Committee will deliver price stability."

In other words, the FOMC may not be done yet raising rates if progress on inflation isn't seen. That perspective is embedded in the dot plot, which shows 16 of 18 Fed officials expecting at least one more rate hike this year. There isn't a consensus on a rate cut, either, until 2028.

A lot will change between now and then, so these dots can very much be thought of as moving targets. For now, it can be said Fed Chair Warsh and his committee took a shot at bringing down inflation by raising rates.

The initial market reaction to this decision and a Summary of Economic Projections that saw an increase in the median estimate for the change in real GDP this year (to 2.3% from 2.2%), the change in PCE inflation (to 3.7% from 3.6%), the change in core PCE inflation (to 3.4% from 3.3%), and a decrease in the unemployment rate (to 4.1% from 4.3%) has been relatively muted.

That would suggest a genuine lack of surprise, but it is likely more of a wait-and-see response in front of Fed Chair Warsh's press conference at 2:30 p.m. ET.