The Fed Leaves its Options Open | Macro Minutes

  • Thursday, June 16, 2016

Welcome to The Signal’s weekly “Macro Minutes.” Each week, we analyze the most important communications from a specific region and provide insight based on our quantitative analysis of central banks.

Yesterday’s FOMC statement, announcing a rate hold (as we predicted), scored at -0.59 with a residual of -0.02. Just barely below average for FOMC statements over the last year, the score was very close to our projection of -0.68 and even closer to our evaluation of LH Meyer’s mock FOMC statement (-0.57).

In our forecast, we explained that the likelihood of a (slightly) hawkish surprise was higher than a dovish one, because we believed that the Committee would likely want to keep its options open for two rate hikes this year…as opposed to signaling just one.

The actual document score of -0.59–slightly more hawkish than our projection–expresses this exact sentiment.


Despite being more hawkish than our projection, this FOMC statement received the third lowest sentiment score in the last 18 months. The only two recent scores lower than this were the December dovish hike (-0.96) and the surprisingly dovish statement in March (-0.98). Although the score for the June statement is significantly closer to the recent average of -0.57, it is still one of just three recent FOMC statements that sit below the mean, indicating a slight dovish turn in sentiment.

The bottom line: yesterday’s FOMC statement was just hawkish enough for the Committee to keep its options open for various rate hike paths throughout the year, but dovish enough to avoid any particular commitment.

The Signal team

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