The past week’s FOMC meeting delivered no rate move, as expected. The Summary of Economic Projections (SEP), meanwhile, contained a handful of modest changes. Real GDP was marked a few tenths of a percent higher over the next few years, unemployment was marked .1% higher in 2027, and inflation was revised slightly higher in this year and next. The “dot plot” of fed funds rate projections was unchanged from December, except for a .125% upward revision to the longer run projection. In his press conference, Chair Powell declared that a rate cut hinged on improvements in inflation, and the market pushed rates higher in response, with strategists dubbing the overall FOMC outcome as a “hawkish pause”. Only one committee member, Governor Miran, dissented, as expected, in favor of a rate cut. The theme of uncertainty, given the Mideast war, was repeated multiple times by Powell, and he also downplayed the importance of the dot plot. The market’s pricing of the Fed has shifted notably upward in the past month; please see herein for more information. The week ahead offers a lighter slate of mostly second-tier data, and so Fed commentary and war developments will play a central role in any market moves.

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…