Federal Reserve: Rabobank on guidance and yield curve pricing

4.25% is the rate Rabobank’s Philip Marey expects to hold through 2027. His forecast calls for no change in October, followed by a December hike and then a pause. Ahead of the FOMC, US Treasury yields extended their bear-flattening trend, according to Rabobank’s Global Daily, while OIS pricing indicated almost no prospect of a hike at this meeting. Markets continue to price in nearly one full hike by December and another by Q3 next year.

4.25% rate outlook: FOMC pricing and yield moves

"US Treasury yields moved in a bear flattening move yesterday, continuing the trend from earlier this month, in anticipation of today’s FOMC meeting."

"OIS curve implied pricing suggests the likelihood of a hike is pretty much off the table, with only around 1.7bp priced in, but all eyes will be on Kevin Warsh’s fourth press conference as Fed Chair, and be looking for forward guidance."

"The market has almost one full hike priced in by December of this year and another full hike by Q3 next year."

"We are forecasting a hold at the October meeting, followed by a hike in December, and then a hold at 4.25% through the end of 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)