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How to track Fed policy
Tracking Fed policy means reading three things in parallel: the official path (statements, dots, minutes), the market-implied path (Fed funds futures, SOFR options), and the financial-conditions transmission (real yields, credit spreads, USD). When all three align, the path is consensus. When they disagree, that gap is the trade. Speeches between meetings matter most when they contradict the prior statement or the dots.
- Official path - Statement language, dot plot, SEP, minutes.
- Implied path - Fed funds futures curve, SOFR option-implied terminal rate.
- Conditions transmission - Real yields, HY OAS, USD, equity multiples.
- Speech tracking - Voters > non-voters. Surprise > confirmation.
The three paths
1. Official Fed path
- Statement (every 6 weeks)
- Summary of Economic Projections / dot plot (quarterly)
- Minutes (3 weeks after meeting)
- Speeches (between meetings - voters most)
2. Market-implied path
- Fed funds futures curve - terminal rate, cut/hike timing
- SOFR options - distribution around the path
- 2Y Treasury - survey of all of the above
3. Financial conditions transmission
- 10Y real yield - has the policy stance actually transmitted?
- HY OAS - is risk appetite responding?
- USD index - is the rate differential being priced?
What to read at FOMC
In order: statement diff vs prior, dot plot shift, press-conference tone, market reaction in 2Y vs 10Y vs USD vs SPX. The reaction is often more informative than the meeting itself.