What was dovish about the Fed in 5 points

We heard from the Fed: no rate hike and a very cautious tone. The US dollar did not fall too much as it remains the cleanest shirt in the dirty pile and almost all the focus is on the EU Referendum.

Nevertheless, we must note the significantly dovish tone heard here, which is perhaps more than markets had anticipated and something that could haunt the dollar:

1. Less members for  two hikes this year: In March, 16 out of 17 members saw two hikes in 2016 or even more. This time only 11 saw two hikes. This continues the Fed’s tradition of climbing down.
2. Lower for longer: The dot-plot for 2017 and 2018 was lowered, with very few rate hikes on the horizon. But it’s not only hikes that have been smoothed out, but also growth prospects. The Fed sees around 2% forever, and Yellen used the phrase New Normal, which means New Mediocre.
3. No talk about “coming months”: In Yelllen’s recent speech, she talked about raising rates in the coming months. While Brexit is an acknowledged hurdle, it isn’t necessarily a big deal for the Fed. So, the prospects of a rate hike even with a Bremain seem low. Neither the statement nor Yellen talked about the coming month or months. She even  hinted it is unlikely in the next meeting or two. For those singling September (too close to the elections in any case), this was a clear signal.
4. Worries about employment: In  the historic December hike, the Fed expressed satisfaction and confidence,  especially about employment. The focus shifted to inflation as a source of worry. And while the  jobs report for May could have been a one-off, the tone from Yellen is certainly worried. And it’s not only Yellen: the statement does  acknowledge the weakness of both April and May.
5. No dissenters: Up until April, a meeting without a press conference, we had the Kansas City Governor Esther George vote for a hike and dissent from the rest of the other 9 votes. Not any more. We now have a unanimous decision for a no-hike and a very dovish statement. The hawks are hiding.

What do you think?

In any case, we are 8 days until the EU Referendum and two more polls are due this week. The Brexit / Bremain issue is capturing markets. A vote to stay is pound and euro positive, dollar and yen negative. A vote to leave is pound and euro negative, dollar and yen negative.

More: Brexit or Bremain – all the updates