Fed holds rates, signals two cuts before year-end
The Federal Open Market Committee left its benchmark federal-funds target unchanged at 4.25%–4.50% on Wednesday, its fifth consecutive hold, while accompanying projection materials showed a median path implying two quarter-point reductions before year-end. The statement retained language describing inflation as "somewhat elevated" but dropped an earlier reference to "persistent" price pressures, a shift several desks characterized as an incremental easing bias.
One member dissented in favor of an immediate cut; another preferred signaling a higher terminal rate. The pace of balance-sheet runoff was left unchanged at $25 billion in Treasuries per month. Front-end yields fell on the release, with the two-year note down nine basis points to 3.61% and the 2s10s curve steepening to +62 basis points.
"The dots do the easing for them," one rates strategist said, noting that positioning had leaned hawkish into the meeting. Futures now assign a 78% probability to a first cut at the September meeting, up from 55% a week earlier.
