Synopsis:

HSBC anticipates that Fed Chair Powell will avoid detailed comments on the implications of the US election for monetary policy at today’s FOMC meeting. Instead, he is expected to reiterate a data-dependent approach, with the Fed likely delivering a 25bps rate cut and minor statement adjustments reflecting recent labor market data. The market focus will then shift to Powell’s tone on a possible December cut, though resilient economic indicators leave room for a pause.

Key Points:

• Election Impact Likely Deferred: Powell is expected to deflect questions on the election outcome’s impact on policy, emphasizing a wait-and-see approach on the new administration’s policies.
• Data-Dependent Guidance: Powell is likely to maintain guidance based on incoming data, reiterating that the Fed’s stance will adjust to inflation and labor market trends.
• November Rate Cut and Statement Changes: HSBC expects a 25bps cut, with slight statement updates reflecting labor market stability.
• December Cut Uncertainty: While the market prices a 75% probability for a December cut, resilient economic growth and stable unemployment may increase the likelihood of a pause.

Conclusion:

HSBC forecasts a 25bps rate cut today with limited Fed commentary on election impacts. Powell is expected to emphasize data-dependency, leaving the door open for a December cut or potential pause depending on continued economic resilience. This measured approach keeps market attention on December’s outlook without signaling a major policy shift.