Tonight, the Federal Reserve FOMC's interest rate decision is imminent... At the same time, the future interest rate dot plot will be announced... Combined with Powell's speech... There will be many points of possible volatility...
Currently, external opinions are quite divided... This time, not cutting rates is already a done deal. However, regarding the future dot plot,
Some say that after maintaining two rate cuts this year... Another possibility is that the dot plot may indicate only one cut this year (which would be a major negative for the market, as a consistently accurate analyst from Bloomberg also predicted just one rate cut)
However, as the 'voice of the Federal Reserve,' Nick published an article in the WSJ yesterday titled The Problem With Wall Street’s Fixation on the Fed Dot Plot
It feels a bit biased...
Key information from the article:
1 There is no suspense about not cutting rates this time.
2 The possibility of changing the announcement of the dot plot from two rate cuts to one is very high because originally the votes for one and two cuts were very close, and if 1-2 people change their prediction to a higher forecast, the median will shift from two cuts to one cut. Therefore, if the market still expects two rate cuts, it will lead to negative volatility.
3 Nick indicated that there is growing dissatisfaction within the Federal Reserve regarding the dot plot mechanism. Adjustments may be made in the future. Because the dot plot makes the market feel that the path is set, but it is actually full of uncertainty. It will also be adjusted based on future market data. (For example, in June 2024, the dot plot indicated only one rate cut, but later in 2024, four cuts were still discussed)
Doesn't it feel a bit like comforting the market? Even if this time it turns out to be one cut, don't be too pessimistic... Maybe by the end of the year, if the data improves, they will continue to cut rates...
4 Currently, the market is highly uncertain, tariffs are raising inflation risks, but the labor market is also showing signs of weakening... The Federal Reserve is also hesitant to make abrupt statements... The dot plot is insufficient to provide a certain future...
In summary, the core point of the article is that the future path shown in the dot plot is inaccurate, and the Federal Reserve will face high uncertainty in the coming year... The number of rate cuts in this dot plot may be revised down...
It feels like Nick has already made it very clear in this article... Tonight, we may face the dot plot announcement, one rate cut, but afterward, Powell's speech could be dovish to comfort the market... This combination...
The dot plot is announced first, and Powell speaks half an hour later... After the dot plot is released, low longs can actually make a move... It's betting on Powell's dovish speech afterward... Combined with what Nick said yesterday, if not for the impact of tariffs, the Fed was actually ready to start cutting rates in June...
So today we are waiting for this...
Yesterday's low long position slowly increased from 105500 to 103500... After rebounding halfway, it came down to break even...
Today, at this position, we just wait for the FOMC... Low longs should be fine... Just wait to dump low longs after the dot plot is released... If it goes up directly after the announcement, we can only wait for Powell's speech...