• At their January meeting, FOMC members effectively completed a U-turn in both policy and tone from their December meeting. Not only did the Fed maintain its policy rate in January, but policymakers have gone to great lengths since the December meeting to emphasize their patience regarding any future rate moves.
  • Prior to the January meeting, four new FOMC voting members spoke separately of the Fed’s willingness to wait on incoming data before hiking rates further. In the statement accompanying the Fed’s January meeting, policymakers omitted reference to “some further gradual increases” as mentioned in December’s statement and added that “the Committee will be patient” before hiking rates again.1
  • Market-based expectations for Fed movements reflect the Fed’s dramatic dovish turn. Since late September 2018, rate hike expectations over the next 12 months have declined from 80 basis points in September to a rate cut as of early February.2
  • While expectations have fluctuated over the past five years, no prior period has seen expectations swing so deeply toward a rate cut, nor have they been accompanied by the degree of accommodative language from policymakers.
  • Looking further out the curve, it’s notable that, while the Fed speaks of taking a break before hiking short-term rates again this year, the 10-year U.S. Treasury yields approximately 2.65%, which is near the bottom of its 12-month range.3

1 U.S. Federal Reserve, https://bit.ly/2FXOmTJ and https://bit.ly/2SuTEZG.
2 Bloomberg, as of February 7, 2019.
3 Federal Reserve Bank of St. Louis, https://bit.ly/29ecBfp.


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