"The most important aspect of the Fed's communication on Wednesday is going to be whether Powell characterizes policy as 'in a good place', as he did for the first several months of 2025 when the Fed was on hold, or if he repeats his description of policy being 'modestly restrictive' or 'somewhat above neutral'. In the case of the latter, the door will remain open to further cuts in early 2026,"
"The chances of the Fed delivering another interest rate cut tomorrow are 90%, according to bets tracked by the CME FedWatch Fed funds futures index. But Wall Street has already priced that in. The S&P 500 ticked down 0.35% yesterday but remained near its all-time high and futures were flat this morning. In fact, traders have already moved on from the decision itself, which they regard as a done deal."
The CME FedWatch shows a 90% chance of a Fed interest rate cut tomorrow, and markets have largely priced that in. The S&P 500 edged down slightly but stayed near record highs, with futures flat. Traders expect the cut and will focus on any change in wording or tone from Fed Chair Jerome Powell after the decision and during his press remarks. Jefferies analysts highlight the phrase 'in a good place' as pivotal; its use could signal less likelihood of an additional cut in January, while omission could keep the door open to further cuts. Powell remains guided by incoming data, and the FOMC is roughly evenly divided.
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