skip to Main Content
 
Home » News » Currencies » FOMC Review: Lower interest rates for longer

FOMC Review: Lower interest rates for longer

*

The Fed meeting has revealed their collective thoughts and we mark-to-market the outcome relative to expectations and positioning.

Clearly, the moves suggest it was taken dovish relative to how markets were positioned, although the fact three Fed members are calling for hikes next year and one for two hikes is interesting. I had been calling for no move in the median dot for 2023 and that came to fruition despite some houses saying we would see not just one lift, but even two hikes being pencilled in for 2023. This proved to be a market mover as I discuss in the video.

The Fed are reactionary, they want evidence before they alter the pace of asset purchases, and the fact is if inflation moves higher and is not transitory, then they will to taper its QE program later this year and start to make noises that they will hike. This is the new world we live in.

(Eurodollar interest rate futures strip)

Eurodollar Interest Rate Futures

If I look at the Eurodollar interest rate markets, we’ve seen good buying into the 2025 contracts, showing rate hikes have been priced out through this period. However, past that yields on contracts into 2027 contracts move aggressively higher. The message: lower for longer, but then it’s showtime and the Fed push harder on the breaks. Of course, there is much that can happen between now and 2027, but this is the message we see in the rates market and I am not sure how bullish that is when you’re taking performance from the future, then being forced to act more intently. For now, though, this was a market-friendly meeting and I address the moves in the video.

This article is brought to you in association with Pepperstone. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader.

Like this article? Sign up for a free email subscription to our regular newsletter.

This article does not constitute investment advice. Do your own research or consult a professional advisor.

The Armchair Trader's 'How to' Guides

Stocks in Focus

We think these smaller companies represent significant growth stories. Read our in-depth reports.

Thanks to our Partners

Our partners are established, regulated businesses and we are grateful for their support.

Pepperstone
FP Markets
IG
WisdomTree
ActivTrades
Tickmill
Back To Top