Today’s FOMC results were about as expected … a so called “dovish” hike.  The Fed announced a 25 bp increase in its fed funds rate target, but reduced its expectations for further hikes.  

Yet it appears the announcement was not quite as dovish as the markets expected.  Following the announcement and during the subsequent press conference, stock prices declined and the yield curve flattened.  Prices of commodities such as gold declined as well as the dollar rose.  

Assuming the committee’s goal was to please this writer, it was a solid success.  Powell and company have been under intense pressure from Wall to Washington, and today they asserted their independence on both counts.  

Sure we could quibble.  During the press conference Powell insisted its balance sheet runoff was on “autopilot”.  His reasoning is that the FOMC wants to rely on rate targeting as its core policy variable.  But inflexibility on the balance sheet will mean less flexibility on rates.  The closer to zero rates remain the less latitude it will have to move them, and relaxing the balance sheet runoff would allow it to get rates further from zero than it would otherwise.  So the FOMC is being shortsighted on this count.  But this will pass…  

In our prior post How Will the December 2019 FOMC Decision Impact Markets? we took the position that just about any realistically expectable Fed decision would leave our market outlook unchanged.  Stocks will still be in a bear market.  Treasuries will still be in a bull market.  Today’s decision qualifies.