Macro● Neutral
Fed Holds at 3.5%-3.75%, Drops Easing Bias. SPX Sells Off
The Fed held rates at 3.5%-3.75% but dropped the easing bias and raised the 2026 dot. The S&P 500 fell 1.8% as growth stocks sold off. Next marker: May CPI on June 12.
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The Federal Reserve left rates unchanged at 3.5%-3.75% Wednesday, a decision that matched consensus. The sell-off that followed was about everything else.
Chair Warsh dropped the easing bias that markets had priced into year-end rate-path expectations. The statement removed language about "gradual adjustments" and replaced it with a data-dependent posture that traders read as a higher bar for cuts. The S&P 500 fell 1.8% on the session, with the move accelerating after Warsh's press conference.
The dot plot shifted higher. The median projection for end-2026 now sits at 3.25%, up from 3.0% in the March summary. Two FOMC members dissented in favor of a hold with a tighter bias, a detail that caught rates desks off guard. Short-dated Treasuries sold off first – the 2-year yield rose 12 basis points to 3.92% – before the move spread to equities.