As expected, the FOMC cut rates 25 bps to 3.5-3.75%, with three dissenters, two in favour of a hold, and Miran once again preferring a 50 bps cut.
The important bits.
- The Fed’s projections showed a significant upgrade to the outlook from September, with 2026 GDP growth revised higher, and both inflation and the unemployment rate a touch lower.
- The mid-point of the dot-plot projection is 3.4% for the end of 2026
- Powell reiterated the expectation that inflation will fall in late 2026, as the one-time price adjustments from tariffs fade.
- Hikes aren’t even under consideration (wink wink, nudge nudge).
The implications.
- Despite the upgraded outlook, the Fed remains sensitive to labour market weakness.
- Most importantly, their bias remains towards lowering rates, with the only question being when.
- US yields are 3-7 bps lower.
