| Interest Rate Market Snapshot | ||||||
| Federal Funds | SOFR | 2Y Treasury | 5Y Treasury | 7Y Treasury | 10Y Treasury | |
| 4.33% | 4.30% | 3.83% | 3.92% | 4.10% | 4.31% | |
Rates left on hold
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Short and sweet today
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No change in rates. A unanimous vote to hold rates steady as the Fed clings to its favorite playbook: wait and see
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That keeps the Fed Funds target at 4.25%–4.50%, and SOFR hovering around 4.35%
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No new forecasts this time either, so Powell spent 45 minutes figuring out how many synonyms for “uncertainty” he could work into his press conference
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Technically, the statement changed — but not in any way that matters:
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“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace”
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“The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated”
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In short, the Fed is comfortable with the economy in the rear-view mirror but worried about stagflation up ahead. If inflation moves up, they have room to hold for longer. If unemployment moves up, they have the room to cut again. Until then, we wait
Today’s takeaway:
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The Fed’s boxed in. Its two mandates — full employment and stable prices — are likely moving in opposite directions this year, and fiscal policy is driving both. Powell can’t pre-emptively cut without risking inflation. He can’t pre-emptively hike without derailing growth. And thanks to Trump’s on-again, off-again tariff policies, there’s zero clarity on what happens next. So, what’s the Fed going to do? Nothing — for now, but Q4 still looks like the most likely starting point. Inflation will keep them sitting on their hands today, but rising job market stress will eventually lead them to cutting again. Until then, it’s more waiting, more watching, and more hoping that the economy doesn’t make the decision for them
SOURCE: BLOOMBERG
Powell beats a dead horse:
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“We are well positioned to wait for greater clarity before considering any adjustments to the policy stance”
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“We think we can be patient, we are going to be watching the data. We do not need to be in a hurry”
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“We are comfortable with our policy stance. Think we are in the right place to wait and see how things evolve. We don’t feel like we need to be in a hurry. We think it is appropriate to be patent. We have a record that we can move quickly when it is appropriate. The appropriate thing to do is to wait and see how things evolve. There is so much uncertainty.”
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Translation: Not until tariffs show up in backward looking inflation or jobs data, will the Fed move again. But if they need to, they will cut by 50 bps like they did last September
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Compare that to a market that still has more than 3 cuts priced into year-end:
SOURCE: BLOOMBERG
3-Year Fixed: a borrower’s best friend still
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3-Year swaps are trading in the middle of their post Liberation Day range, moving very little today but still offering interest rate savings to borrowers in the 0.75%-0.95% range
SOURCE: BLOOMBERG
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