BNY's Macro Strategist John Velis provides insights on the upcoming January FOMC meeting, indicating that no change in interest rates is expected. The report highlights a modest chance of a rate cut and suggests that the Fed will maintain a steady stance in the coming years. The focus will be on the balance of risks regarding inflation and the labor market, with no significant policy shifts anticipated.

January FOMC preview insights

"No change in the policy rate is expected at Wednesday’s FOMC meeting. Market expectations imply a slight 3.4% chance of a cut. Indeed, the next rate move is not expected until at least July, and the year-end federal funds rate is seen to be just 45bp lower than the current 3.75% target (3.64% effective)."

"The market’s modest expectations through the end of 2026 extend into 2027. As Exhibit #1 shows, the implied rate for December 2027 is nearly identical to that for this December. Essentially, the market expects only slight policy easing this year, followed by a steady stance next year."

"This meeting is therefore expected to be uneventful from a monetary policy standpoint. There is no Summary of Economic Projections in January. Only the policy statement will be released, followed by the regular post-meeting press conference with Chair Powell."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)