November FOMC Preview: Peak Pace but not Peak Terminal

We have come a long way from September FOMC and Jackson Hole. Following these two episodes, markets panicked because the thought was a dropdown in the pace of rate hikes was still far off and an imagined pause in the rate hiking cycle seemed like it could only come *after the Fed broke something. And despite minimal evidence that the spot inflation data has begun to cooperate with the Fed at all, the market narrative has shifted to a stepdown in the hiking pace coming in December that Powell might confirm his press conference tomorrow. To me there are two questions going into the FOMC tomorrow, first, what has changed since the last time the committee met and second, where are they going as surely the Fed does not want to give the message that “dropdown” = “finished.” The Fed will hike 75bps at their meeting this week, but the focus of the meeting is if Powell can convince markets that dropping down in pace doesn’t = lower destination and certainly doesn’t = dovish.