The chances of the Fed delivering another interest rate cut tomorrow are 90%, according to bets tracked by the CME FedWatch Fed funds futures index. But Wall Street has already priced that in. The S&P 500 ticked down 0.35% yesterday but remained near its all-time high, and futures were flat this morning. In fact, traders have already moved on from the decision itself, which they regard as a done deal, even though the Federal Open Market Committee is sharply divided over whether a cut should actually take place.
Instead, they will be looking closely for any change in wording or tone in U.S. Federal Reserve Chair Jerome Powell’s official statement after today’s meeting and tomorrow’s new rate announcement, and in his remarks to the press when he takes questions.
Jefferies analysts Thomas Simons and Michael Bacolas will be watching for whether Powell says four words in particular: “In a good place.” If he says that phrase, it perhaps implies that he is not leaning toward a further rate cut in January. If he does not use that phrase, he may be open to more cuts after this month.
“The most important aspect of the Fed’s communication on Wednesday is going to be whether Powell characterizes policy as ‘in a good place’, as he did for the first several months of 2025 when the Fed was on hold, or if he repeats his description of policy being ‘modestly restrictive’ or ‘somewhat above neutral.’ In the case of the latter, the door will remain open to further cuts in early 2026,” they told clients in a note seen by Fortune. “We do not expect that he will say policy rates are ‘in a good place,’ but that will be the phrase to watch out for.”
