| Interest Rate Market Snapshot | ||||||
| Federal Funds | SOFR | 2Y Treasury | 5Y Treasury | 7Y Treasury | 10Y Treasury | |
| 4.33% | 4.29% | 3.94% | 4.00% | 4.20% | 4.41% | |
Summary
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The Fed held rates steady at 4.25%–4.50%, for the fourth consecutive meeting
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The Dot Plot still shows two cuts in 2025, but with very low conviction
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Economic projections now show slower growth, higher inflation, and more labor softening
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Powell acknowledged inflation is easing, but the Fed wants “more data” and remains “well-positioned to wait.”
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Market response: muted but leaning dovish. September cut odds held around 60%
Before we get into the weeds, here’s what matters to commercial borrowers:
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A “wait and see” approach may work for the Fed — but it doesn’t work for commercial borrowers in the real world
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Spot SOFR is still near 4.35%, but fixed-rate swaps are trading 0.20% - 1.00% lower. Using them in your risk management strategy lets you capture those cuts upfront vs. waiting/hoping/crossing your fingers they show up in the future
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Here’s where rates stood after the meeting — call or email if you want to talk through levels, strategy, or where working orders are getting done
SOURCE: STONEX/BLOOMBERG
Best practices today:
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Don’t wait for a cut to be official. By the time Powell commits, the curve will have repriced
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Use working orders below market — especially in the 2- to 3-year space — to catch soft data or geopolitical shocks
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Layer in over time, especially if you’re managing future funding needs or refi needs into Q4 or early 2025
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The market is giving you pricing that reflects what the Fed will eventually do, not what it’s saying today. That’s your edge
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The best hedges aren’t about predicting the cut — they’re about capturing the value before the Fed follows through with it
SOURCE: BLOOMBERG
Back to the Fed, let’s squint at the data…
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The Fed left its policy rate unchanged at 4.25%–4.50% today, extending its streak of holds to four meetings — a widely expected outcome
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But beneath the surface, the Summary of Economic Projections (SEP) and Powell’s tone told a more dynamic story: the economy is slowing, inflation remains sticky/at risk of rising, and the job market is weakening — all while the Fed resists committing to action
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Notably:
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Core PCE inflation was revised higher to 3.1% for 2025, up from 2.8% in March
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GDP growth was revised lower to 1.4% (from 1.7%), suggesting the Fed sees economic momentum fading
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Unemployment is now expected to reach 4.5% by year-end
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SOURCE: STONEX/BLOOMBERG
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Despite these shifts, the Dot Plot still shows two cuts this year — but that projection is on the edge:
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7 of 19 officials now see no cuts in 2025
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8 see two cuts — just one defection away from a one-cut median
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But even Powell acknowledges that these forecasts are nearly worthless: “with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction”
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SOURCE: STONEX/FED
Powell’s message: progress, but not permission
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In his press conference, Powell worked hard to avoid sounding too dovish — but even he couldn’t ignore the shifting data
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He struck a tone of cautious optimism, acknowledging disinflation progress, slower growth, and labor softening, but emphasized that the Committee still wants more “confidence.”
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Notably, Powell:
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Downgraded his assessment of policy from “clearly restrictive” to “modestly restrictive”
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Said risks are now “more balanced,” particularly between inflation and employment
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Admitted the FOMC is “in a place where we can hold or cut — either option is on the table”
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Note that hiking rates is nowhere near the conversation – important for borrowers crafting a hedging strategy
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That’s the closest Powell has come to signaling outright readiness to move — without actually moving
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On the labor market:
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“It’s not as tight as it once was. It’s harder to find a job, hiring is slower.”
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On inflation:
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“The recent readings are encouraging, but not yet sufficient.”
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And on tariffs:
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“They’ll likely push up prices and weigh on activity. The scale and duration remain uncertain.”
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In short: Powell’s not blind to the data. He’s just not in a rush
Market response: muted, but dovish leaning
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Markets largely took the outcome in stride:
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2-Year Treasury yields fell 1-2bps to ~3.94%
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September rate cut odds held at ~60%
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December is still fully priced for two cuts
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The Fed didn’t disrupt anything — but it also didn’t settle anything
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The SOFR curve continues to reflect ~50bps in cuts by year-end, with 2- and 3-year swap rates holding below 4.00%
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Powell gave the market enough to stay positioned for easing — even if he stopped short of validating it
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That’s Powell’s new lane: reassure without revealing
SOURCE: BLOOMBERG
SOURCE: BLOOMBERG
Zooming out
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Rates across the curve remain largely range bound. Today keeps us there
SOURCE: BLOOMBERG
SOURCE: BLOOMBERG
Dfmm: 3.97%, 3.65%, 3.55%, 3.57%, 3.78%
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