FOMC Preview: Another 25bps Cut

After today's historic election outcome, which has once again made a mockery of the farcical "polling profession" when Donald Trump crushed Kamala Harris in both the popular and electoral vote by winning almost all swing states, while Republicans swept both the Senate and the House, Thursday's Fed rate cut will be at best anticlimatic, but since it will probably move markets - far less than it did in September of course - we should cover it.

So here's what Wall Street consensus expects.

The Fed is widely expected to continue with its easing cycle in November with all analysts expecting the Fed to cut by 25bps, in fitting with money markets pricing in a 25bps rate cut with a 99.8% certainty. This would take the target for the FFR to 4.50-4.75%, or roughly in line where the 10Y is about to trade in a few days. The statement will focus on the language the Fed uses to describe the economy with risks now "roughly in balance" and to gauge any future rate guidance. There will be a lot of attention on commentary from Fed Chair Powell in the press conference to see how the Fed expects the Trump to influence the economy and the outlook. Powell is likely to maintain optionality when it comes to future rate guidance by stressing a data-dependent, meeting-by-meeting approach. In the September press conference, the Fed Chair said "We can go quicker if that’s appropriate. We can go slower if that’s appropriate. We can pause if that’s appropriate". Any explicit signal to one of these options as a preference would be a key development.