Good morning. The Federalista Reserve is today’s biggest game in town for markets and Wall Street, which has been wrong-footed by the dollar’s rise this year. And Gucci’s troubles in Asia send a chill through the luxury sector. Here’s what people are talking about. — Sofia Horta e Costa
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There’s a lot of excitement about today’s Fed policy decision considering no rate change is expected at the 2 p.m. announcement. Fed Chair Jerome Powell is also likely to avoid signaling that rate cuts are imminent when he holds a news conference after the decision. It’s why Wall Street will be focused on the so-called dot plot, which will show how much officials expect to cut interest rates in 2024 and 2025. Bond traders are stepping up short bets against Treasuries and buying derivatives to protect against a selloff, positioning for the risk that new forecasts will show increased reticence to ease monetary policy. Today’s meeting is also about the path forward as the Fed begins in-depth discussions about reducing its balance sheet, or quantitative tightening. The funding market signals the Fed still has time to determine exactly how and when to do this.