Deutsche Bank strategists report that the Federal Reserve (Fed) left rates unchanged but saw four dissents, the most since 1992, including both dovish and hawkish objections. Chair Powell signalled policy is well placed to be held given Middle East uncertainty, and futures now price a higher probability of a Fed hike by April, with cuts largely priced out.

Dissents and pricing tilt hawkish

"All that follows an eventful decision from the Fed yesterday. They kept rates on hold as expected, but there were notably 4 dissents, which is the most for an FOMC decision since 1992."

"He [Powell] also said that the“policy stance is in a good place for us to hold” amid the uncertainty stemming from the Middle East, and our US economists write that it reinforces their baseline view that the policy rate is likely to remain unchanged this year."

"For markets, the combination of higher oil prices and a more hawkishly divided Fed saw investors price out rate cuts this year, with futures for the December meeting pricing 3bps of hikes by the close."

"Moreover, the path ahead is increasingly turning hawkish, with futures now pricing a 55% probability of a Fed hike by next April."

"Aside from policy, the other big news was that Chair Powell will stay on as a Fed Governor once his four-year term as Chair ends on May 15."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)