Federal Reserve policy statement and press conference Wednesday

My question for this board would be: Does this economy look like it really needs the rate cut the market is clamoring for?

Personally, I just don't see enough bad things going on to justify a change. Is the market getting ready for a big drop?

Anyone care to contradict?

I forgot about QT and rolling off the MBS. How do Fed Funds rate tie in to this activity? Ability to roll more off when rates are higher?

And did i hear something about discontinuing this in September? Nobody talking about it. What will be the impact from that?

quote:

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The willingness of the Fed to cut rates is already baked into the market. If they change their most recent language (i.e. not being open to it) then the market will take a hit.

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I believe it’s more than just this, the market is pricing in rate cuts. Like a 96% chance they will cut by December. If they change their stance on that bc the markets have reacted positively, then their will likely be some added volatility.

The Markets are very similar to an addict in that these low rates were their drug. When we stopped QE, we put the markets in rehab and were weaning them off a drug. When we were going through QT, it was like introducing someone back into the real world with no more drugs. Now that we are hearing rumors of lower rates again, the markets are craving that drug and getting all excited.

Personally, I don’t think rates should be cut at this point.

traditionally the fed has gone by unemployment rates, GDP, and inflation targets to make decisions. They try to avoid talking about the stock market. Besides, the stock market pales in comparison to debt markets. Bonds/debt are king and always will be. Debt is how banks and Fiat currency exist. The stock market will adjust accordingly.

Fed Funds rate isn't gonna directly affect MBS currently held the Federal Reserve except maybe some floaters. It might affect prepayment rates on mortgages which ultimately affects the yields of the securities. Rates have been so low for so long a .25% adjustment won't really change prepayment rates much because everyone has already refinanced their house. The costs associated with refinancing just to get 0.25% better rate is likely more in most cases.

There's your .25 cut.
It was ~75% priced in, with the other 25% being a 0.5 cut

Them raising was a lock. The only uncertainty was 0.25 vs 0.5 (LOL, the nerve of the market)

Yeah, oops