• The Fed fund futures forward curve shows contracts priced between 96.5 and 96.75 through the October 2026 issue.
• This tells us the market is not pricing in a cut in the Fed fund rate until at least the October 2026 meeting.
• This will not sit well with the US White House that is demanding lower rates despite the increased concern over long-term inflation caused by the War in Iran. 

Early Wednesday afternoon, US Fed Chairman Jerome Powell will step to the microphone and announce the Fed fund rate will stay unchanged for the time being based on continued concerns over inflation and the labor market. There won’t be any fireworks or grandiose statements. Chairman Powell will make his comments then answer as many questions as possible from the press, even those from Faux News. And life will go on. Am I psychic, knowing this is how the day will play out? No. A look at the Fed fund futures forward curve early Wednesday morning shows futures contracts are pricing in an unchanged Fed fund range between 3.5% and 3.75% through the October 2026 issue (ZQV26).

Let's walk through the calculations based on the price of futures contracts (1% - Futures Price = Expected Rate)

• March at 96.375 = 3.625%
• April at 96.36 = 3.64%
• May at 96.36 = 3.64%
• June at 96.38 = 3.62%
• July at 96.415 = 3.585%
• August at 96.465 = 3.535%
• September at 96.49 = 3.51%
• October at 96.52 = 3.48%
• November at 96.555 = 3.445%
• December at 96.605 = 3.395%
• January 2027 at 96.625 = 3.375%
• February 2027 at 96.64 = 3.36%

Over the next year, the US Federal Open Market Committee has meeting scheduled for: 

• March 17 and 18
• April 28 and 29
• June 16 and 17
• July 28 and 29
• September 15 and 16
• October 27 and 28
• December 8 and 9
• January 2027 26 and 27

If the FOMC cuts its rate by 25-basis points at the conclusion of the October meeting, as indicated by the Fed fund futures forward curve at this writing, the range would drop to 3.5% to 3.25% (dashed green line, top of chart). Note futures contracts out through the February 2027 issue are nowhere near indicating a second rate cut, the futures market needing a price of 96.75 or higher. 

Recall from the minutes of the January 2026 meeting that a divided Fed decided “further interest rate cuts should be paused for now and could resume later in the year only if inflation cooperates”. What has happened since the end of the January meeting? Due to the US starting a war in Iran:

• Crude oil (CLJ26) has gained as much as 83% in price
• RBOB gasoline (RBJ26) is up as much as 61.5% and
• Diesel fuel (distillates, heating oil, jet fuel, etc.) (HOJ26) has added as much as 60%

Additionally, the commodities complex in general has rallied on F.O.I.L (Fear Of Inflation Long-term) from global investors.

• The US soybean market (ZSK26) rallied as much as 16% on not necessarily the Truth Social media posts regarding China buying soybeans from the US. All while Brazil’s record large harvest continues to make its way to port.
• The Cash Gold Index (GCY00) has added as much as 11% as a safe-haven market against both the new War and old inflation fears.
• But the Cash Copper Index (HGY00) is down 3% over concern of an economic slowdown.

As for other markets of interest tied to the US FOMC and the Fed fund rate: 

• The US dollar index ($DXY) has gained as much as 3.5% on the idea rates won’t be cut again any time soon due to F.O.I.L.
• The S&P 500 ($INX) has lost as much as 315 points (4.5%) with
• The Dow Jones Industrial Average ($DOWI) down as much as 2,400 points (4.9%)

Wednesday’s Fed decision, announced by one of the US president’s many nemeses, Fed Chair Powell, will likely ignite a string of angry social media posts designed to influence markets both domestically and globally. We know the US president has already named Mr. Powell’s replacement, for now starting with the June 2026 meeting. But what happens if the market is correct and this new puppet Chairman does not immediately lower rates? Will the US president break out his well-known reality television line, “You’re fired!” and name a chairman who will lower rates regardless of inflation? Time will tell.