FOMC is tomorrow
June 17, 2025
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–The good news is I am long URNM. The bad news is that it might sow the seeds of humanity’s demise.
–Bloomberg Economics is suggesting the Fed may pare down the projection for Fed Fund cuts this year from 2 to 1. According to the March SEP, at end of 2025, the FF projection is 3.9 (or 3.875% from current midpoint of 4.375%) and in 2026, down to 3.4%. Yesterday SFRZ5 settled 9611.5 or 3.885 and SFRZ6 at 9668 or 3.32%, both essentially aligned with March projections. Is there downside in near SOFR contracts on a change in Fed dots? Perhaps briefly, which would likely be a buying opportunity in the face of a slowing domestic economy and growing global uncertainty. It’s actually infrequent that the SOFR strip and Fed dots tell the same story, and plots are likely to wildly diverge in the next year.
–Core CPI inflation was expected 2.8% at end of this year and 2.2% at end of 2026 (March projections).
–Flies in the ointment are obviously tariffs (likely a one-time price shift) and oil prices as Iran’s facilities are hit. Then there’s domestic politics. Powell’s term as Chair ends in May 2026. It’s less than a year away, and for practical purposes it’s reasonable to call the end of the Powell era as end of this year. The economy is very clearly slowing, but not yet forcing the Fed’s hand. Trump is likely to tap Erdogan’s son-in-law as he’s already had sparkling experience as Turkey’s finance minister. Just kidding, but the risk is clearly an ‘easy-money’ Fed Chair.
MARCH 2025 SEP below
