Fed opens door to easing policy

 The dollar dropped back while treasuries and equities rallied after the FOMC meeting where the Fed struck a notably dovish tone and signalled that rate cuts may be in the offing. The euro is now back above $1.12 to the dollar and the American currency lost out to sterling and the yen also

The Fed kept the Federal Funds Rate on hold at 2.25% to 2.5% but dropped the reference to “patient” in its policy statement. There were a number of signals in the document to suggest they are preparing to change policy as it noted that uncertainties to the outlook have increased while inflation pressures remain muted and in light of this the FOMC is closely monitoring incoming information and will ‘act as appropriate’ to sustain the expansion

The decision to stay on hold was not unanimous with one member, Bullard, voting for a quarter point cut. The updated dot plot forecast showed the committee is divided but has an easing bias with eight of seventeen projecting lower rates by year end, another eight seeing them on hold and just one forecasting rates going up. Chairman Powell in his press conference said that ‘many’ Fed officials ‘now see that the case for somewhat more accommodative policy has strengthened’

Bank of Japan also met and stayed on hold. Governor Kuroda said risks were rising and the Bank stood ready to ease policy if necessary but gave no indication that any move was imminent

Bank of England meeting next up today. The MPC virtually certain to stay on hold and repeat that its outlook remains Brexit dependent

Data due today includes UK retail sales, euro area consumer confidence and the Philly Fed in the US. Speakers include de Guindos from the ECB and the Governor Carney follows up the MPC meeting with his Mansion house speech tonight