Powell Expected to Leave the Rate Cut Door Open After Today's Fed Policy Decision
Here’s what the market expects further out, and what we’re watching with today’s updated projections.
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At 2 p.m. ET on Wednesday, the Fed will deliver its final monetary policy decision of the year, and at around 2:30 p.m. ET, we will get one of the few remaining post-policy pressers conducted by Fed Chair Powell.
In between those items, we’re going to review the Fed’s policy language and examine differences between its latest set of economic projections and the ones published in September.
While we’ll be looking for changes between the two when Wednesday's update is released in areas like economic growth, the unemployment rate and inflation, our main focus will be on the number of expected rate cuts between 2026 and 2027. Back in September, the Fed’s outlook included just one 25 basis point rate cut next year and another one in 2027.
Looking out at the CME Fed Watch Tool, it currently shows the market expecting the federal funds rate to be between 350 basis points and 375 basis points after Wednesday's Fed policy meeting, between 325 basis points and 350 following the June 2026 meeting, and between 300 basis points and 325 basis points exiting the October 2026 meeting. From there, the CME FedWatch Tool sees the fed funds rate remaining at that level through October 2027.
Should Wednesday's updated set of economic projections back the market’s outlook, something that is possible given what we’ve seen of late in the monthly ADP job creation data, that would be a positive for the market. If the Fed reiterates its view for just one 25 basis point rate cut next year, the market probably won’t digest that news very well.
What We Think Could Happen
Our thinking is that, because we won’t receive the October and November Employment Report data or the CPI data for those two months until mid-December, we could see Powell leave the door open for further rate cuts. In other words, the central bank will remain data-dependent.
If we’re right and that is the message Powell strives to deliver on Wednesday afternoon, subject to his wording and tone, that is a message that would be accepted by the market.
Now, let’s see what happens.
