Good Morning on this Wednesday and best day of the week,

Today will be the most important day of the month for rates.

The Fed concludes its FOMC meeting today and in roughly 2 hours, it will release the rate decision (there will be no change), the dot plot (individual Fed member expectations on rates for the next three years), and then Chairman Powell’s Q&A (the most important piece of the day). I think the Dot plots and the Q&A are going to disappoint markets, as the Fed is going to want to walk back at least some of the rapid improvement bonds have seen since early November. It is tough to float into today’s news. If you do float, please be careful. There will be a lot of volatility today.

The news so far today was bond friendly.

PPI month over month in at 0.0 vs 0.1 Core PPI month over month in at 0.0 vs 0.2. PPI flows into CPI in the future so we can see the fight over inflation is working. The 10yr has dropped to 4.15% today. My fingers are crossed that these levels hold after the Fed meeting but as I shared, I am not too confident.

On the Fed, here is a good primer from Bloomberg on today..

The Federal Reserve is set to hold rates steady for a third consecutive meeting, with an expectation that it will push back against the ramped-up bets on cuts to come next year. Yesterday’s inflation report showing a pick up in consumer prices damped hopes of a more dovish pivot, with a pause the unanimous view of the big banks watching the decision. Chair Jerome Powell has said it is too early to speculate on when rate cuts may start to materialize and instead policymakers are likely to emphasize a desire to stay on hold and continue assessing how higher borrowing costs are impacting the economy.

Not much more to share for the moment… Please remain safe and healthy!