We Need To See the Dot Plot
That’s the fuel for the market’s next move.
It would be almost impossible for Jerome Powell to top what Bank of Japan Governor Kazuo Ueda did on Tuesday.Nor is it the Federal Reserve Chair’s style to roll that way.
So there will be no surprise rate cut – or a surprise rate hike! – today.
The best we can hope for is an interesting dot plot.
The Fed Guy, Joseph Wang, shared his forecast on X on Tuesday: “Best guess tomorrow - not much different from December.”
The Fed Guy noted that inflation has been a bit higher than expected but said “the path was always expected to be bumpy.” He observed as well that the market has priced out a lot of cuts and currently reflects the December dot plot.
That is, three cuts. So perhaps even that won’t be so interesting…
That’s the question on which price action will turn today: how many rate cuts will the Fed include in its updated dot plot.
As of Tuesday the CME FedWatch Tool was pricing in a 99 percent chance of no change today. The odds of a rate cut on May 1 are less than 4 percent. The market does expect a cut in June.
There are folks out there who are warning of other kinds of surprises.
Kathleen Hays, editor in chief of Central Bank Central, spoke with former Atlanta Fed President Dennis Lockhart on Tuesday.
Lockhart told Hays the dot plot could show just two rate cuts in 2024, as Jerome Powell and company await further confirmation of disinflation.
Under this scenario, we could be looking at rate cuts after the election following November and December FOMC meetings.
The market might not rally on that kind of news.
How many dots will the central bankers plot?
Not a lot, it’s thought…
