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Posted September 16, 2025 at 12:55 pm
Tomorrow’s Fed decision is widely expected to feature a 25 basis point cut although participants are projecting that there will be disagreements in the committee. There’s a 95% likelihood of a 25 amidst slim single-digit chances calling for a pause or a bigger reduction amounting to 50. Meanwhile, there’s an 82% chance of at least one dissenter alongside probabilities ranging from 17% to 33% of exactly one, two or three officials formally disagreeing.
Participants are expecting a Fed benchmark of 3.625% or 3.875% by year-end, which signals two to three 25 basis point cuts by Christmas.
Participants also envision a quarter-point reduction from the BoC tomorrow morning, although there’s no chance of a 50 according to our prediction market.
Tomorrow’s new residential construction report from the Census Bureau features both housing starts and building permits, which have been volatile and on a weakening trend in recent months as immigration restrictiveness, lofty valuations and elevated rates have weighed heavily on activity even as the long end has been plunging lately. Against this backdrop, I like the “Yes” answers at the 1.1 and 1.2 million thresholds for starts, which are going for $0.97 each, as well as the “Nos” at 1.5 million and 1.6 million, which are costing $0.89 and $0.98, respectively. The median estimate is at 1.37 million with the monthly Reuters poll consisting of 49 forecasters ranging from a minimum of 1.25 million to a maximum of 1.48 million. Furthermore, the indicator has stayed between 1.2 million and 1.5 million in all of 2025. For permits, the monthly Reuters poll of 38 forecasters stands at a median of 1.37 million with a minimum of 1.32 million and a maximum of 1.44 million, but I’m suspicious of a strong rebound and am avoiding the “Yes” answers here and instead just going with the “No” at 1.5 million for $0.98. Similarly, it’s a level that hasn’t been breached all year.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of September 16, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes and No” answers throughout different levels.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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