US Short End Thoughts

Markets are leaning hard into an October cut, with futures now assigning near certainty to a 25 bp move and even a tail for 50 bp. But what’s striking isn’t just the short-term setup, it’s how the Fed’s latest projections reconcile stronger growth, stickier inflation, and yet an easier policy path. On the surface, it looks contradictory.

In reality, it marks a shift in the Fed’s reaction function, away from “higher for longer” and toward a new kind of risk management.