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STIR: US Near-Term Rate Path Mirrors Dot Plot In Wait-and-See Mode

STIR
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  • Fed Funds implied rates are near unchanged overnight ahead of today’s Presidential Election along with a still heavily influential ISM Services report.
  • The path to mid-2025 can roughly be seen as consistent with the FOMC median dot plot with 50bp of cuts to year-end (mostly priced) before a quarterly pace in 2025.
  • Cumulative cuts from 4.83% effective: 24.5bp Nov, 45bp Dec, 59bp Jan, 75bp Mar and 99bp June.
  • The expected pace of rate cuts then slows materially after mid-2025 compared to FOMC projections for a Fed Funds target range of 3.25-3.5% end-2025 and 2.75-3% in 2026 (200bp of cumulative cuts from today). SOFR implied terminal yields show less than 125bp of cuts for the cycle, little changed on the day and close to highs since early July. 
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  • Fed Funds implied rates are near unchanged overnight ahead of today’s Presidential Election along with a still heavily influential ISM Services report.
  • The path to mid-2025 can roughly be seen as consistent with the FOMC median dot plot with 50bp of cuts to year-end (mostly priced) before a quarterly pace in 2025.
  • Cumulative cuts from 4.83% effective: 24.5bp Nov, 45bp Dec, 59bp Jan, 75bp Mar and 99bp June.
  • The expected pace of rate cuts then slows materially after mid-2025 compared to FOMC projections for a Fed Funds target range of 3.25-3.5% end-2025 and 2.75-3% in 2026 (200bp of cumulative cuts from today). SOFR implied terminal yields show less than 125bp of cuts for the cycle, little changed on the day and close to highs since early July.