The Fed takes back half its rate cuts

The Federal Open Market Committee's September meeting delivered an unmistakable hawkish message wrapped in a neutral policy hold. While the committee kept benchmark rates unchanged, its updated dot plot sent shockwaves through fixed-income markets by eliminating 50 basis points of projected rate cuts for 2024. The median projection for late 2024 shifted up to 5.1 per cent, signalling an unwavering commitment to prolonged restriction.

Deleting the Pivot

By taking back half of its projected easing, the Fed effectively dismantled the market's cherished pivot narrative. The committee is adapting to structural economic strength by raising its estimate of where the policy plateau must sit. Fixed-income investors who positioned for a swift easing cycle are being forced to capitulate, driving benchmark yields to multi-decade peaks.

The Fed’s updated dot plot did not merely signal higher rates for longer; it actively erased the market's easing expectations, forcing the sovereign curve to realign with institutional resolve.