The last FOMC meeting of the year starts today. By 2 pm tomorrow we’ll know what the official rates will be for the rest of the year and until the first one on January 30-31st, 2024. Expectations for tomorrow firmly point towards no change. However expectations for future rates, have moved a lot tecently. As you can see below, there is still a big difference between what the Fed communicated and market expectations. But over the last few months, those expectations have moved from pricing 3 cuts, to pricing 5 cuts, only to adjust again and price 4 cuts for next year. That’s just due to two data points, inflation and unemployment. The market is also ignoring 2024 is an electoral year, where rate cuts are controversial, as they can be perceived as helping the incumbent administration. Further adjustment is needed.
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Chart source: Bianco research
