Kevin Warsh's Fed decides at 2 p.m. with a hold at 90.6% odds and the 10-year yield back above 5%
The market has priced the decision. The press conference is the event. Oil climbed after a Houthi attack on Saudi Arabia's Ras Tanura refinery, and GDP and PCE data arrive Thursday.
Photo: AgnosticPreachersKid / Wikimedia Commons (CC BY-SA 3.0)
The Federal Reserve ends its two-day meeting on Wednesday, and the market has largely made up its mind about the decision itself. What it has not decided is how Chair Kevin Warsh will describe the path from here, with December now the meeting that matters most for rates.
The decision is due at 2 p.m. ET, and Warsh's press conference is scheduled for 2:30 p.m. ET, according to Benzinga and Livemint.
A hold is priced in
Traders put the odds of no change at 90.6% early Wednesday, based on the CME FedWatch tool, according to CNBC, Benzinga and TMGM. That would leave the federal funds target range at 3.75% to 4%, where it has been since the Fed raised rates by a quarter point in September, its first hike since 2023 and the first under Warsh.
December is a different story. CNBC put the odds of a 25-basis-point hike at the December meeting at 76.5%, TMGM cited 84.3%, and Investing.com described it as roughly a three-in-four chance. The spread between those figures reflects different timestamps, but the direction is the same: the market expects the next move to be up, not down.
That is why the press conference matters more than the statement. Investing.com noted that Warsh has long resisted giving explicit forward guidance, so investors may have to read his tone rather than a clear signal. Midterm elections are next week, and central banks generally avoid big policy changes right before a vote, Livemint noted.
Yields push back to 5%
Treasury yields moved higher ahead of the decision. The 10-year yield, the benchmark for mortgages and many consumer loans, rose more than 2 basis points to about 5.013%, CNBC reported, and Benzinga put it at 5.01%. The 2-year yield, which tracks expectations for Fed policy more closely, was near 4.75%, according to both outlets.
The 10-year has been hovering right around 5% for days. Data compiled by Exa showed the 10-year constant maturity rate at 5.00% on both Oct. 23 and Oct. 26, after 5.13% on Oct. 21. A sharp move either way after Warsh speaks would show whether the bond market reads him as hawkish or patient.
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Stocks into the decision
Tuesday's session ended higher across the board. The S&P 500 rose 0.60% to 7,722.60, the Nasdaq Composite gained 1.18% to 26,477.81 and the Dow added 15.99 points, or 0.03%, to 52,377.57, according to CNBC and Exa market data. Chip stocks led after Broadcom said a group of banks would provide $63 billion in financing tied to its chips for Anthropic.
Futures were mixed before dawn on Wednesday. By about 4 a.m. to 5:30 a.m. ET, S&P 500 futures were up about 0.1%, Nasdaq 100 futures were up between roughly 0.3% and 0.6%, and Dow futures were down about 0.2%, according to Investing.com and TipRanks.
Oil climbs again
Energy remains the main source of inflation pressure. Brent crude rose 0.7% to $114.68 a barrel and West Texas Intermediate rose 1.42% to $101.32 early Wednesday, CNBC reported. Report.az and finanzen.net showed Brent closer to $115.50 and WTI between $101.33 and $101.67 later in the morning.
The move followed a claim by Iran-backed Houthi forces that they hit Saudi Arabia's Ras Tanura refinery, the kingdom's largest, with a ballistic missile, according to CNBC. President Donald Trump said on Tuesday that the war with Iran would end on his terms, CNBC added.
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Gold eases
Gold slipped after climbing about 1% on Tuesday. Spot gold was down 0.3% at $4,045.29 an ounce in Asian trading, CNBC reported, and finanzen.net showed $4,050.44 later in the European morning. Higher oil prices feed inflation expectations, which can keep rates higher for longer and raise the cost of holding an asset that pays no interest.
The calendar
- Wednesday: weekly mortgage applications and September wholesale inventories, neither typically market-moving, according to ING via Investing.com.
- 2 p.m. ET: Fed decision. 2:30 p.m. ET: Warsh press conference.
- After the close: Alphabet and Microsoft earnings.
- Thursday: third-quarter GDP and September PCE price index, the Fed's preferred inflation gauge, plus Amazon earnings.
The setup is simple on paper: a hold that is almost fully priced, a 10-year yield sitting on 5%, and oil above $100. The surprise, if there is one, will come from what Warsh says about December.
