Goldman Sachs says that this week’s FOMC assembly is prone to be a boring affair, with the Fed not going to supply any coverage modifications and just some minor tweaks to their assertion language. Total, that will not give markets an excessive amount of to work with about what is going to come subsequent and Fed chair Powell may also play it protected in his press convention.
“The January FOMC assembly is prone to be uneventful, with no change to the fed funds charge, solely minor modifications to the assertion, and few hints in regards to the future coverage path. Chair Powell is prone to emphasize that the FOMC has simply delivered three cuts that ought to assist to stabilize the labor market and is properly positioned for now whereas it assesses their influence.”
As a reminder, Fed funds futures are usually not pricing in something for this week with ~97% odds of no change to rates of interest. The primary full 25 bps charge lower is barely priced in for July with odds of a transfer in June hovering round ~75%. The latter is the place Goldman Sachs sees the Fed transferring later this yr earlier than only one extra charge lower to complete the cycle:
“We have now penciled within the subsequent 25bp charge lower in June, adopted by a remaining lower in September to 3-3.25%.”
That roughly suits with what Fed funds futures have priced in, which is ~46 bps of charge cuts by the top of 2026.
