Fed-funds-futures traders are mostly expecting a total of four or five quarter-point rate cuts between now and the end of next year, or more than central bank officials have flagged as likely to be appropriate.
Given this gap in expectations, “we do not expect [Fed Chair Jerome] Powell to make any attempt to endorse the market’s view at this juncture,” said Matthew Ryan, head of market strategy at U.K.-based financial services firm Ebury, in an email. While the Fed will probably underscore threats to employment on Wednesday, “upside risks to inflation continue to provide a headache,” he wrote.
“Powell will again need to walk a delicate line between signaling further cuts, while simultaneously keeping expectations in check,” Ryan said. “Now more than ever, we think that Powell will want to strike a non-committal note that effectively sends a `nothing to see here’ message to market participants.”
