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Inflation data since January have been higher than anticipated, causing market participants to adjust their expectations significantly.
The Fed announced plans to slow its balance sheet normalization process in the upcoming month.
Starting in June, the central bank will decrease this rate to $25 billion monthly, a reduction from the current $60 billion.
Federal Reserve Chair Jerome Powell, in a post-decision press conference, conceded that the unexpected rise in inflation figures has likely postponed the timing of any potential rate reductions.
“I think it’s unlikely that the next policy rate move will be a hike. I’d say it’s unlikely,” Powell said.
Here’s what major investment banks had to say about the FOMC statement, Powell’s press conference.
Morgan Stanley: “The changes to the FOMC Statement were minimal. There was recognition of the lack of further progress in recent inflation data, but the statement still acknowledged that inflation has eased over the past year and maintained an overall easing bias.”
Evercore ISI: “We interpret this overall as on the more minimalist end of the range of possible updates for what has to be a hawkish reset meeting following the setbacks on Q1 inflation.”
“…Relative to expectations this is a very measured hawkish reset, consistent with the idea that the (thin) base case is still two cuts starting by September, though a longer delay.”
Bank of America: “We retain our view for a first rate cut in December on the idea that inflation will remain stickier and slower to come down. We still think the bar for rate hikes is high, and Powell seemed to corroborate that in his comments.”
