The past week’s economic reports were generally neutral, with some modest improvement revealed in parts of the inflation data. All in all, the data has fortified the Fed’s “on hold” posture. The Mideast situation remains fluid, and any meaningful developments could move the rates market. For now, markets are pricing in greater odds of a Fed rate hike by late-2026 and early-2027. The FOMC outcome on Wednesday afternoon should highlight the upcoming week’s calendar. While no change in policy rates is anticipated, with the lower/upper bounds remaining 3.50/3.75%, the quarterly Summary of Economic Projections (SEP) for growth, inflation, unemployment rate, and policy rate (“dot plot”) will be released and draw market attention. A set of housing market reports is also due in the coming week.

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…