Reasoning
Given that the Federal funds target range is currently 3.50 to 3.75 percent and that the Federal Open Market Committee has erased a prior cutting bias, economic growth may be stunted as borrowing costs remain elevated. Additionally, with nine of eighteen SEP participants projecting the year-end 2026 rate above the current target range, there is potential for further tightening. This environment introduces uncertainty about sustained manufacturing growth, contributing to a lower likelihood of the ISM Manufacturing PMI remaining above 50 for three consecutive months.Key uncertainty
Unexpected improvements in global supply chains or an increase in consumer demand that could result in stronger manufacturing activity.