Powell gives us his base case and market responds

With Jay Powell at the NABE coffee talk saying that under his base case the Fed will cut two more times this year, 25 bps at each of the remaining two this year but cuts past this will play out over time and they aren’t looking to rush them from here as they are not on any pre-set course, the 2 yr yield is now above where it stood on September 17th, the day before the 50 bps cut, rising by 10 bps today. The 10 yr yield is back to 3.80%.

Bottom line, the market has priced in so many rate cuts with a 2025 year end fed funds rate at 2.85% as of Friday’s close (and today rising to 2.95%) and while it still might happen, his comments are not matching up with those expectations under his base case. Also note, while the dots are what they are, the median dot is at 3.40% by yr end 2025, also not, as of now, matching those market expectations.