More Thoughts on the Fed

In my first take I said nothing about Hoenig's dissent and that is what many in the market are talking about. I did not think it was all that important primarily because it was not the typical kind of dissent when the FOMC would vote to keep rates on hold and a member would disagree, wanting to say cut rates. Hoenig's dissent was over future guidance. He wanted to drop the guidance about conditions allowing rates to be on hold for an extended period. I also did not think it was significant because Hoenig's views are well known and the role that had been played by Lacker is now Hoenig's. The two-year note did sell-ff sharply, with yields rising 5 bp on the day. This puts the yield up 3 bp over the past five sessions and down 24 bp this month. Fed funds futures leaned a wee bit more toward and Aug rate hike. It appears that others see the dissent as casting a largely unchanged statement with a less dovish tint. Complimenting this is the characterization of the growth outlook as moderate instead of weak.