The Federal Reserve Open Market Committee today reduced their target for overnight interest rates by a third 25bps to a range of 1.50% to 1.75%, completing the Greenspan-esque “three insurance cuts” cycle.

What is unique about this pre-Halloween rate slash is that, in comparison to the last two, the markets are pricing much lower odds of subsequent cuts. On the day before both the July and Sept FOMC meetings, we had more than 50% odds of a cut priced in at the next meeting; as of yesterday’s close, we had a mere 20% chance of a December cut. If the Fed wants an opening to pause in its current cutting process, today is about as good as the Central Bank is going to get. Mission accomplished?

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Guy LeBas

Director, Custom Fixed Income Solutions

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