FED SUMMARY: Fed leaves rates on hold but three members vote for a hike, statement largely left unchanged

The Fed left rates unchanged at 3.50-3.75%, as expected. However, the meeting produced three dissenting votes, with regional Fed Presidents Logan, Hammack and Kashkari all preferring a 25bps rate hike. The remainder of the statement was largely unchanged from June, continuing to provide no explicit forward guidance. The Committee also reiterated that "The Committee will deliver price stability".The Fed's assessment of the economy was also maintained. The statement continued to note that "Economic activity is expanding at a solid pace", while adding that "Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little."The initial market reaction was dovish, with participants unwinding much of the hawkish pricing that had built ahead of the meeting. Prior to the decision, money markets were assigning roughly a 34% probability of a 25bps rate hike at this meeting. Regarding market pricing, 18.6bps of hikes are priced in for the September meeting, vs the 24bps priced on Tuesday - this implies a roughly 75% chance of a hike at the next meeting. Note, given the change in communication under Chair Warsh and absence of forward guidance, each confab is seen as "live" and can therefore lead to more volatility around rate decisions. Regarding the dissents, it is worth noting that Logan, Hammack and Kashkari also dissented at the April meeting, opposing the Committee's decision to retain an easing bias in the statement. That easing bias has since been removed under Chair Warsh, although the three policymakers now favour higher interest rates.