Expect some market whiplash today

To paraphrase what I said on Monday, there is high potential for market whiplash today. We'll get the initial reaction at 2pm and then see how Powell sells it at 2:30pm which I believe will offset the market impact of the cut size. If he cuts 25 bps, he'll tell us that 50 bps is possible in the coming meetings. If he cuts by 50 bps, he'll tell us not to get used to that cadence. Either way, this is all market noise as we've already priced in so many cuts through next year. 

Understand that there is a huge differential between what we saw in the June dots and what the fed funds futures market is currently pricing in. That market is pricing in about a 2.90% fed funds rate by October 2025, while the Fed's median dot for year end 2025 is much higher at 4.1%, with a 3.1% rate by year end 2026. Thus, AGAIN, today's 25 or 50 bps is an irrelevant action compared to the notable cuts ALREADY priced in. 

On Monday I mentioned that my chips were on 50 bps today but I'm moving it back to 25 bps but followed with talk that 50 bps is on the table for the coming meetings. The market impact will remain the same. 

As for those dots, they are irrelevant too as Powell gets what Powell wants and he'll corral the voting members around to that. Thus, his dot is the only one that matters and unfortunately he doesn't put his name on it.