Via the excellent Damien Boey at Credit Suisse:
The Fed delivered a “hawkish” easing this morning, cutting the Fed funds rate by 25bps to 1.75-2%, and the interest rate on excess reserves by 30bps to 1.8%. Importantly, officials reiterated their “median” guidance for no more rate cuts this year. Interestingly, there were three dissenters – a very unusual, and certainly unconventional pattern of voting. Two members of the board chose to vote against cutting rates, preferring instead to leave rates unchanged. One member opted for a 50bps cut.
In response to the announcement, bonds sold off a little, led by the short-end of the curve. The cash/10s yield curve steepened mechanically on the back of the rate cut, while the 2s/10s curve flattened, as investors responded to relatively hawkish guidance. Within the equity market, value was largely flat, while momentum and quality gained a little.
