FOMC Day Minus One: Waiting For Nothing

The federal funds rate (FFR) futures market has consistently been predicting several cuts in the FFR since March 2023 (chart). The Fed did deliver three rate cuts totaling 100bps from September 18 through December 18, 2024. Since then, Fed officials have said that they are in no hurry to lower the FFR again. Nevertheless, the FFR futures market is currently anticipating two rate cuts over the next six months and four rate cuts over the next 12 months. We've been in the none-and-done-in-2025 camp since the last rate cut. We remain in that camp.

We reckoned that the economy would remain resilient. We still think so, but Trump's Tariff Turmoil (TTT) is stress-testing the resilience of the economy. It will probably slow economic growth and boost inflation. A short bout of stagflation is likely.