"Here we go again. It's Federal Open Market Committee (FOMC) meeting week, and Chairman Jerome Powell is likely to once again disappoint the White House by announcing a hold to the base interest rate. How fierce the reaction from the Oval Office will be is anyone's guess, but markets are fairly convinced that the two-day conference concluding tomorrow will result in the interest rate being held steady in the range of 3.5% to 3.75%."
""Underpinning this is our belief that the labor market is improving, and that unemployment will decline ahead on a trend basis," the duo wrote in a note seen by Fortune this week. "A key risk to this view is the potential for an incoming Fed Chair to sway the committee in a more dovish direction. However, we believe this risk is mitigated by a potential shift in the new Chair's incentives once they assume the role.""
Markets expect the FOMC to hold the federal funds rate at 3.5%–3.75% after the two-day meeting. The CME FedWatch tool shows only a 2.8% chance of a 25-basis-point cut tomorrow. Many economists expect easing in 2026 due to a weakening labor market and limited pass-through from tariff policies. Political change at the Fed with a President-nominated replacement could favor a dovish chair. Macquarie economists argue the labor market is improving and that the Fed's next move could be a rate hike, citing potential normalization of the base rate and changing incentives for a new chair.
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