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2025-09-18 08:04:36
[CICC: Milan Lowers Dot Plot Average Rate Cut Expectations] A CICC research report states that the core message of this Fed meeting is that the "risk-controlled" rate cuts were standard, while the "dot plot" projects two more rate cuts this year, but with significant disagreement. 1) On the surface, the "dot plot" projects two more rate cuts this year, but a closer look at the voting distribution among the 19 voting members reveals that nine predict one or fewer rate cuts, nine predict two, and one predicts another 125 basis point cut (clearly unlikely, with market speculation suggesting Milan). In other words, if Milan's low forecast hadn't lowered the average, the "dot plot," which uses the median as the final outcome, would have been roughly evenly matched, with the probability of one or two rate cuts this year, roughly in line with the current futures market's projections of over 80% probability of rate cuts in October and December, respectively. 2) The divergence in 2026 is even greater, with the median probability of only one rate cut, significantly less than the three currently priced in by the futures market. However, because next year involves the reshuffle of Powell and several committee members, the market has not overreacted to next year's path.
