Good morning,

Yesterday, for the first time since July 2023, the FOMC unanimously hiked rates by 25bps, which the Committee said “will support a timelier return” of inflation to their stated 2% target. The Summary of Economic Projection had a dovish tilt. The Committee projected inflation to ease significantly next year, largely in line with the June SEP, but it was notable that the Committee does not see core returning to target until 2029, which stretches the meaning of “timely”. The DOTS showed broad support for an additional hike this year but for rates to hold steady throughout 2027. Chair Warsh’s press conference was short, ending abruptly at the 30 minute mark, and a bit more hawkish. The Chair suggested that the rate hike comes at a time when the economy seems to be strengthening and reiterated, “I would be hard-pressed to describe broad financial conditions as restrictive. This view was widely shared by the Committee. So, we removed a dose of accommodation.” This seems to suggest that the Committee is looking to unwind some if not all of the late 2024 cuts. Yields were lower ahead of the decision but reversed sharply. There was a flattening of the curve with the 2yr up ~7bps, a ~14bp reversal from the lows. The long end also ended off the lows closing around unchanged. Equities gave up early gains selling off during Chair Warsh’s press conference. The S&P 500 was down ~1% at the lows testing its 100d ma before bouncing in the final 30 minutes of trade to close the session down 0.4%.

Futures have been moving higher throughout the overnight as there is some geopolitical optimism and following some positive corporate updates reinvigorating the AI trade. Oil prices are down ~3% on a mix of headlines. President Trump is reportedly going to meet with Gulf leaders on the sidelines of the UN meetings next week, there are reports the East-West pipeline could come back on line in the coming days and that China has privately pushed Iran to throttle back the Houthis. The pullback in oil is also sending Treasury yields down >5bps across the curve. S&P futures are at morning highs up ~1.2%, trading just above yesterday’s highs recouping all of the post Fed weakness. Keep in mind tomorrow is triple witch expiration which may add to some of the volatility.