The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Fed stands pat
Overnight was calm, as was our morning. The S&P opened around +10 and bobbed about that level until the FOMC statement released. Yields didn’t change much in that period while crude climbed consistently. The FOMC statement was brief and the changes in language were boring, and more importantly, neutral with respect to future Fed policy actions. Markets moved very little and waited for the press conference.
The presser was as bland and neutral as the statement. Markets moved around a bit but I have no idea why. What Chairman Warsh said was innocuous and suggested nothing about a path for the Fed Funds rate. There was an interesting communication about future Fed meetings although they didn’t move markets. The Fed will continue to meet 8 times per year but in 2027, the Fed will conduct one of those meetings where they will not evaluate rate policy nor will they release a policy statement. They will use that meeting to discuss strategic monetary policy. Who knows what that actually means. What the Committee releases to the public after that meeting is TBD. In 2028, the FOMC will conduct 2 of those strategic meetings.
*Maybe* fewer rate meetings suggest few rate hikes or rate cuts but that’s a big speculation and I don’t put much stock in it. That said, it is a change to the FOMC schedule and policy agenda.
So after everything is said and done, today was as close to a non-event that I can remember on an FOMC decision day. Fed Funds futures currently price a 25-bip hike in December with 84% probability. That is about what’s it’s been for the last week. Peak rates are till expected between Sep and Oct of 2027. The peak of 4.58% suggests 2-3 hikes and is slightly lower than from earlier this month.
I thought that hearing from the Fed would result in markets kicking off in some direction with conviction. It turns out that whatever we just learned, which wasn’t much, didn’t change anyone’s conviction. Consequently, prices haven’t changed much either.
See you tomorrow.
-Mike
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