The Fed meets next Wednesday (3/20) which will be accompanied by the Summary of Economic Projections (SEP or “dot plot”) report done at every other FOMC meeting. Among other variables, FOMC members report where they think the Fed Funds Rate will be at the end of the next four subsequent calendar years and longer-run. Despite Jerome Powell’s attempts to play down its importance, it has become a closely-watched window into where the Fed thinks the Fed funds rate will be in the future.

As of the last report in December, the SEP showed median expectations for Fed Funds to be three rate cuts in 2024 (down to 4.6%) and four cuts in 2025 (down to 3.6%) which contributed to the bull run in U.S. Treasury bonds at the time. But, since then, economic data has improved, inflation has gotten hotter, and inflation expectations have risen which will undoubtedly cause many of the Fed to project fewer rate cuts this year and next.

I suspect the dots will shift upwards significantly next week given how dour the economy looked in December which will cause Treasury yields to rise when it is seen in print on Wednesday, but also as this idea becomes priced-in leading up to the meeting.