The FOMC decides today. Futures price just 2bp for this meeting, so the Fed holds, and the decision that counts sits in December, where 21bp is now priced. The strip runs to 73bp by December 2027, or 2.9 hikes in 25bp moves.
My view is that the risk here is a hawkish hold. Dissenting votes and Warsh's tone could do the work a hike would have done.
The market may also be overlooking a second element. The Treasury General Account has climbed to $1,021 billion, a new high, pulling cash out of the banking system, while the SOFR-EFFR spread has widened to 5bp.
If equities sell off after the decision, headlines will point to the Fed, but funding also deserves some blame.
Alphabet and Microsoft both report after the close tonight, with Amazon tomorrow. CapEx guidance and cloud growth decide how those land.
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