The Fed meeting kicks off in D.C. today. The monetary policy statement is due out tomorrow at noon our time, accompanied by the Summary of Economic Projections (A.K.A: the Dot Plot), then followed by Fed Chair Powell’s press conference. I’m expecting some hockey rhetoric from Mr. Powell – –meaning that he will acknowledge the right cut but emphasize that the Fed does so very carefully.
I think I’ve said this every day but I know that you don’t read every day and I don’t expect you to remember everything I’ve written about. The last three times the Fed cut their overnight rates, long-term rates (mortgages and longer yield notes) went down heading into the meeting and then rose markedly in the weeks following the announcement. This time around, long-term rates are rising ahead of time, and I’m holding out hope that they start decreasing tomorrow.
Tomorrow’s odds are 100% chance of a 25bp rate cut, and Fund Futures only show two cuts in 2026, which is a change from the three forecast last month. Globally, there is almost no prospect of further interest rate cuts from the European Central Bank, and around a 30% chance of a hike by the end of 2026. The Bank of Japan will raise its benchmark rate 25bp next week to 0.75%, with at least one more increase expected next year.
