Synopsis:

Bank of America expects a 25bps rate cut at the November FOMC meeting, with minimal changes in policy language and Chair Powell’s message. The Fed is likely to look past the October jobs data, and BofA anticipates limited market impact from this meeting as attention shifts to the upcoming US elections and December FOMC.

Key Points:

• Rate Cut Expected: BofA forecasts a 25bps cut, with the FOMC statement seeing minimal adjustments outside of the updated policy rate.
• Powell’s Message: Chair Powell is expected to downplay the October jobs report’s weakness, though he may acknowledge recent downward revisions to payrolls.
• Election Overshadowing: The November meeting is likely to have a limited market impact, with the US election taking precedence for markets and potentially influencing the Fed’s future path.
• FX and Market Strategy: BofA sees the Fed meeting as less influential for FX than the election, with December FOMC likely being more significant. They advise investors to add duration on UST dips and anticipate currency markets will focus more on the election’s outcomes.

Conclusion:

BofA anticipates a muted market response to the November FOMC, with broader focus on election outcomes and their implications for the Fed’s path. A December rate decision is expected to have greater significance for FX and funding markets, while the November cut may be seen as part of a gradual normalization strategy.