The highlight of the past week was the largely uneventful FOMC meeting at which, as expected, rates were left unchanged. While two officials unsurprisingly dissented on the decision and were in favor of a cut, Chair Powell noted a strong consensus within the Fed to keep rates steady. The Fed noted that unemployment has shown signs of stability and that activity has expanded at a solid pace while inflation remains somewhat elevated. The official statement also removed comments that had noted rising downside risks to employment. The reaction in the rates market was minimal. A pause by the Fed was likely bolstered as well by the lingering uncertainties from delayed and/or partial data, owing to the government shutdown in the Fall, tariff policy and court rulings thereon, and the upcoming transition in Fed leadership this spring. The week ahead offers a few labor market-related reports of which the employment situation report on the 6th should be the most prominent and influential. These reports should add context to the FOMC and Powell’s comments regarding employment dynamics.

Back by popular demand, Frank Farone, Managing Director of Darling Consulting Group, returns to join us once again for an informative session focused on Liquidity and Asset/Liability Management. Frank will address key challenges and provide actionable strategies to help FHLBNY members stay resilient and take advantage of the new rate environment now and in the months/years to come.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…