Press Conference UPDATE :

Key Hawkish Comments:

"A further cut in December is not a foregone conclusion, far from it"

Translation: December cut probability should DROP significantly from 89.8%

1. December Cut Uncertainty

- "Strongly differing views" on December

- "Not a foregone conclusion, far from it"

- Market Impact: December cut now 50/50 at best (was 89.8%)

2. Economy Firmer Than Expected

- "Data from before shutdown show economy could be firmer"

- Suggests less need for aggressive easing

3. Tariff Concerns

- "Higher tariffs are pushing up some goods prices"

- Could make Fed pause to assess inflation impact

- "Could be more persistent" = inflation risk

4. Balanced Stance

- "Took a more-neutral stance" on employment risks

- Confirms our read: risks stabilized, not escalating

Updated Assessment:

Original (Statement Only): Hawkish, USD +0.2% to +0.4%

After Powell: Confirmed and even more Hawkish, USD +0.4% to +0.6%

Why More Hawkish:

1. ✅ December cut "far from" certain = major repricing event

2. ✅ Economy firmer than expected

3. ✅ Tariff inflation concerns = pause risk

4. ✅ "Strongly differing views" = no consensus to cut

Market Implications:

Before Powell:

- December 25bp: 89.8% priced

After Powell:

- December 25bp should reprice to: ~50% or lower

- Terminal rate expectations: HIGHER

- USD: Stronger vs all currencies

Trading:

- Long USD aggressively (vs EUR, JPY especially)

- Sell December cut probability (if you have access to OIS markets)

- Steeper yield curve (less front-end cuts priced)

Final Verdict:

Fed is nearing end of easing cycle much faster than market expects.

Powell essentially said: "We might not cut in December, and we're debating it heavily."

This is massively hawkish relative to 89.8% market pricing.

USD target revised UP to +0.5% to +0.8% from statement/Powell combined.

After FOMC Statement(Pre Press Conference)

Decision: October 30, 2025 | 25bp cut to 3.75-4.00%

The Verdict: Hawkish Cut

Fed delivered the expected 25bp cut but with hawkish forward guidance suggesting employment risks have stabilized.

Expected USD Impact: slightly bullish

Key Changes from September

Element	September	October	Signal
Employment Risk	"downside risks to employment have risen"	"downside risks to employment rose in recent months"	✅ Hawkish (past tense)
Job Market	"Job gains have slowed"	"Job gains have slowed this year... more recent indicators consistent"	✅ Hawkish (stabilized)
Vote Split	1 dissent: Miran (wanted 50bp)	2 dissenters: Miran (50bp) + Schmid (hold)	Slightly Hawkish (Schmid flipped)

What Matters Most

1. Past Tense = Risks Stabilizing

September: "downside risks to employment have risen" (ongoing concern)

October: "downside risks to employment rose in recent months" (past event, now stable)

Implication: Fed sees labor market stabilizing, not deteriorating further. Supports fewer future cuts.

2. "Consistent" = No Further Weakening

October added: "more recent indicators are consistent with these developments"

Translation: Latest data confirms slowdown isn't accelerating. Employment picture unchanged since September.

3. Schmid's Hawkish Flip = Major Signal

September: Schmid voted FOR 25bp cut (4.00-4.25% → 3.75-4.00%)

October: Schmid voted AGAINST, wanted to HOLD at 3.75-4.00%

Why This Matters:

Schmid supported easing just 6 weeks ago
Now believes Fed should pause at current level
Suggests he views 3.875% (midpoint) as at or near the 3.0% neutral rate
This is a very hawkish shift in just one meeting

Vote Breakdown:

Dovish dissent: Miran wanted 50bp (more aggressive easing)
Hawkish dissent: Schmid wanted hold (pause already) — NEW

Implication: Growing FOMC sentiment that Fed is approaching end of easing cycle.

Match to Pre-Committed Scenario

Scenario Occurred: 25bp cut + hawkish guidance (approaching neutral)

Pre-Committed USD Impact: +0.2% to +0.4%

Why Hawkish:

Employment risks described in past tense (no longer rising)
Recent data "consistent" = not deteriorating
Schmid flipped from supporting cut to wanting hold = major hawkish shift within FOMC
Suggests Fed believes it's nearing 3.0% neutral rate

What We're Waiting For

1. Economic Projections (Dot Plot)

Key Question: Does 2025 year-end projection stay at 3.6% or move?

3.75% (no December cut) = Very hawkish, confirms our read
3.6% (one more 25bp) = Neutral, one more cut as previously planned
3.4% or lower = Dovish, more cuts than September

2. Powell Press Conference (2:30 PM EDT)

Watch for:

"Are we approaching the 3.0% neutral rate?" (hawkish if yes)
"Could you pause at the next meeting?" (hawkish if open to it)
How does he explain the past-tense employment language?

Relative to Market Pricing

What was priced: 25bp cut (96.7%), then 89.8% for another 25bp in December

What we got: 25bp cut + language suggesting employment risks stabilized

December cut probability drops from 89.8%
Terminal rate expectations rise slightly
USD strengthens vs EUR, JPY

Key Takeaways

25bp cut delivered as expected (96.7% priced)
Forward guidance is hawkish — past-tense employment risks = stabilized
Schmid's hawkish flip — voted FOR cut in September, now wants HOLD
Schmid's dissent may imply Fed nearing 3.0% neutral at current 3.875% rate
Expected USD: somewhat bullish on statement alone
Powell at 2:30 PM — could amplify or moderate hawkish interpretation

Module 6

Trade Setups