Fed to hawkishly adjust median dot plot as 'unanimous vote' not expected

All eyes will be on Washington on Wednesday, with the FOMC set to unveil its latest policy decision after European markets close.

Another 25bp reduction to the fed funds rates appears to be a nailed on certainty, with officials appearing keen to prioritise the jobs market at the expense of keeping a tight grip on US inflation (incidentally, yesterday’s JOLTS jobs report surprised to the upside).

But, there is a clear sense that the committee is becoming increasingly divided over the path for rates beyond this month’s meeting.

While the doves will continue to argue over the state of the jobs market, others appear have voiced fears that aggressive easing could lead to entrenched inflation. We suspect that this polarisation will be reflected in the Fed’s communications.

Right off the bat, we do not expect a unanimous vote, with two or three of the hawks to potentially opt for no change. Chair Powell will also likely again acknowledge the “wide range” of “strongly differing” views in the FOMC, and he will probably attempt to temper bets for a January cut.

As for the dot plot, we expect a wider disparity of views relative to September, but suspect that the median dot will err on the hawkish side and show just one further rate reduction in 2026 - this will probably be the key to the dollar reaction tomorrow.