Fed policymakers losing patience - RBC

Nathan Janzen, senior economist at RBC, pointed out that today's Fed policy statement, which was slightly more dovish than already dovish expectations, only reinforces market expectations that a 25 basis point cut to the fed funds target range could be on its way.

Key quotes

"A total of 8 out of 17 meeting participants think it will be appropriate to cut rates by the end of this year.  7 of those think two 25 basis point cuts will be appropriate and one (James Bullard) voted for a rate cut immediately in June."

"That is a sharp shift from March when no members thought a rate cut would be appropriate this year – and a dramatic change from the end of last year when the median participant still saw 2 more hikes this year. The statement dropped the word “patient” in determining future adjustments to interest rates."

"That will only reinforce expectations that a potential cut in rates at the next meeting in July is firmly on the table." 

"We still think tensions could ease around next week’s G-20 meetings in Japan, but the Fed is also clearly aware of the damage that further escalation could have on the US economy and is ready, willing, and able to step in with rate cuts if needed."