What Happened

  • The Fed left rates unchanged but emphasized data dependence and patience on cuts.
  • Treasury yields jumped, led by the front end.
  • The dollar strengthened and equities sold off.
  • Rate volatility spiked after the statement and press conference.

What It Means

  • The market’s cut expectations have been pushed out again.
  • Higher yields pressure long-duration assets and tighten financial conditions.
  • A stronger dollar can weigh on commodities and EM risk.

What I Think

  • This is a reminder that policy will stay restrictive without clear inflation progress.
  • I expect value and defensives to outperform until yields stabilize.
  • Any relief will need confirmation from upcoming data.

Market Terms

  • Data dependence - Policy guidance tied to incoming economic data.
  • Front-end shock - Short-term yields moving sharply on policy news.
  • Financial conditions - The combined effect of rates, credit, and FX on the economy.