FED Rate Decision
Don’t be surprised. Just as the bond market reacted inversely (long term rates have risen substantially since the rate cutting cycle began)to the FED first rate cut back in Sept., there is a good chance something similiar is going to happen beginning with Wednesday’s decision.
The FED is likely to pause (at least for one meeting) and hold rates where they are. I would not be surprised if long term interest rates decline (maybe not in the first hours or even days) after the decision. It may not be a dramatic drop, nor a sustainable one, but long term rates will probably be unchanged or lower by the time the next meeting is held.
The first two paragraphs were written yesterday. Now that I see what is going on in the futures market overnight I would not be surprised if a stock market crash over the next few days forces the FED hand to cut rates Wed., instead of pausing. Either way rates will fall.
I believe this is what Trump and Bessent orchestrated when Trump last week was saying rates will come down and yes, Powell will end up listening to what he (Trump was saying). If this was still Yellen heading up the plunge protection team, they would be in the market buying stock futures and selling VIX to bail out the market. That was why every decline was always rescued under Biden. Trump waited until days in front of the FED meeting to allow the market to have at least a two day mini crash to try and get the FED to cut. Even if to save face, Powell doesn’t cut Wed. he will have a dovish press conference so the market will bounce at least for a few days after the meeting. More importantly than what stocks do, long term treasuries will rally and yields go lower at least for a few weeks.