Traders continued to pare back their bets on another Fed cut, just ahead of the announcement later today. As of now, fed fund futures are only indicating 54.2% chance of a -25bps to 1.75-2.00%. That’s notably lower than 87.7% chance just a week ago. Trade tensions seemed to be easing a with a US-Japan deal in sight. Also, there is prospect of de-escalation in US-China tariff war. Additionally, oil prices surged this week after an historic disruption in production facilities in Saudi Arabia. Inflation might come back earlier than originally expected.
Though, for now, the rate cut is still generally expected. Updated economic projections would be a major focus, include rate path and dot plots. Additionally, Chair Jerome Powell’s press conference will be closely watched too. The question is whether Powell would signal the end of the so-called “mid-cycle” adjustment.
Here are some suggested readings: