Tomorrow's Tone: Hawkish Rate Cuts

Focus:

1. Neutral interest rate, how many more rate cuts, expecting two

2. Dot plot, September SEP shows only one rate cut in 2026, with the Fed internal vote being 10 to 9. This time I think the best scenario is 10 to 9, with a close 11 to 8, or 12 to 7, with most expecting only one rate cut in 2026.

Currently, the market expects two rate cuts in 2026, and there will be slight adjustments after the dot plot is released. However, considering the new chairman's attitude after taking office and the discussions about changing Fed members, the impact of the dot plot will be reduced.

The last rate cut of Grandpa Powell's era has concluded, marking a perfect ending. If there is another rate cut during his term, the issues in the labor market may become significant, and this risk is indeed rising.