Reports that Putin has called up more troops in the war in Ukraine sparked a modest rally in Treasuries to start the day, a rare sight in recent days. FOMC day has finally (and thankfully) arrived. There has been very little buying conviction in the bond market over the last week ahead of today’s much anticipated meeting. As is typically the case, there’s more focus on the Fed’s updated projections for the path of the fed funds rate, even if the actual path is obviously dependent on unknown future data. That said, market participants would like to see numbers behind the Fed’s recent mantra of higher for longer. What do they see as the terminal fed funds rate and the rate at the end of 2023 and beyond? Current market pricing has the funds rate peaking at 4.50% in Q1/Q2 next year and holding above 4% throughout 2023. Powell will likely be very careful on providing commentary that could be misconstrued, as was the case following the prior two FOMC meetings when some market participants clung to what was perceived to be hints of a “Fed pivot.” As was conveyed in the Jackson Hole speech, Powell is likely to reiterate a commitment to combating inflation even as it comes with economic pain, which leaves investors to attempt to draw conclusions from the updated Summary of Economic Projections.  

Jason Haley
Chief Investment Officer