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The Fed made its decision: no change and sounded quite dovish. Here is the quick insight from CIBC:

Here is their view, courtesy of eFXnews:

With the ‘Brexit’ vote looming and employment hitting a soft patch, the Federal Reserve chose to leave interest rates unchanged today. Indeed, the Fed chose to reference the recent weakness in the labour market atop its statement, but the central bank did say that it expects the employment situation to strengthen again.  Overall, there weren’t any wholesale changes in the statement.  With regards to the dot plot, the median of FOMC participants still see two hikes occuring in 2016, however now six participants see only one hike this year as opposed to only one in March. Longer-dated projections saw a more pronounced move lower, with the median now forecasting three hikes in each of 2017 and 2018, in contrast to the four that were previously expected.

Additionally, Esther George is no longer dissenting and calling for an immediate hike as she seems to have been swayed by the recent soft patch in employment data. Interestingly, while the unemployment rate currently stands at 4.7%, longer-run projections weren’t lower, suggesting that the employment gains the Fed expects to see are projected to be accompanied by higher labour participation.

With no reference to any potential tightening coming up and a relatively dovish set of projections, we’re sticking to our call for no hike until September. The release will be positive for fixed income and negative for the US dollar.

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