Hi YXI friends,

As expected, the FOMC was a non-event. The Fed decided to hold, but with two dovish dissenters, Miran and Waller, voting for a 25bp cut.

The key driver for this pause was a shift of attention back to inflation from the labour market. The Fed judged that the labour market had stabilised while inflation had remained elevated, therefore no rush to cut.

During the press conference, journalists sported a wide range of questions about the Fed's independence, Powell’s future (whether he will resign soon), and the criminal investigation. This is the first time I’ve heard Powell say this many “no comments” in a conference - even the Fed’s favourite, WSJ’s Nick Timiraos, had his question shut down.

From only a handful of questions that were really answerable, we understand that there is room for lower interest rates. This is because the Fed believes that the current inflation readings are mainly driven by the tariff impact on the goods prices, which is one-off.

If the labour market deteriorates, the Fed can cut lower. Plus, there is a generally expected path towards the middle of the FOMC members' neutral rate estimate (as seen in the latest Summary of Economic Projections).

After the FOMC, META, MSFT, and TSLA reported earnings. The outcomes were: one up (META), one down (MSFT), and one flat (TSLA).

We will cover all three earnings in great depth individually tomorrow, once we have absorbed the full market reactions. Unfortunately, that means no Friday video for this week.

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