Ephemeral Calculations: A Treatise on Rate

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The matter of interest rates, as any student of cyclical phenomena will attest, is less a science than a cartography of expectation. In the recent past – a term, of course, relative to the observer’s fleeting existence – the prognostications regarding adjustments to the federal funds rate were… restrained. The prevailing consensus, as recorded by the instruments of the CME FedWatch, suggested a single descent of twenty-five basis points throughout the entirety of 2025. A modest reckoning, given the infinite possibilities inherent in the market.

I ventured a contrary thesis, positing a more substantial attenuation – a full percentage point. This was not based on the illusion of prescience, but on a recognition of the inherent instability of economic equilibrium. Inflation, a phantom perpetually receding, had begun to diminish, and the uncertainties, like shadows in a vast library, were lengthening. The actual outcome – a reduction of seventy-five basis points – was, as is often the case, a compromise between aspiration and reality. A partial validation, sufficient to warrant further inquiry.

Three Speculations Concerning the Rates of 2026

In the preceding cycles – 2024 and 2025 – we observed a collective descent of one hundred and seventy-five basis points. The current estimations, predictably, anticipate a further easing of fifty basis points in the coming year. This, I submit, is a calculation based on incomplete data. The market, a labyrinthine structure of interconnected desires, is susceptible to unforeseen currents.

I foresee a period of heightened uncertainty, a disruption in the accustomed order of things. The pressures on the labor market, like the turning of gears within a complex mechanism, are mounting. Furthermore, the impending transition in leadership at the Federal Reserve introduces an element of indeterminacy. The very notion of a ‘stable’ rate is, upon closer examination, a fiction we construct to navigate the chaos.

Therefore, I offer the following conjectures, acknowledging their provisional nature:

  • The Federal Reserve will ultimately reduce rates by four increments. The prevailing probabilities, as assigned by the arbiters of the market, place this outcome at a mere eleven percent. Yet, I maintain that it is a far more likely trajectory, given the confluence of factors at play.
  • The yield on the ten-year Treasury – a reflection of long-term expectations and a determinant of capital allocation – has remained stubbornly resistant to decline. As of this writing, it stands at 4.19%, a figure exceeding its level in mid-2024, when the federal funds rate was significantly higher. I predict a precipitous fall, culminating in a rate below 3.5%, a threshold not witnessed since early 2023. This shift will reverberate through the realms of dividend stocks, real estate investment trusts, and corporate borrowing.
  • The conventional wisdom anticipates minimal fluctuation in mortgage rates. Fannie Mae forecasts a modest dip to 5.9% by year-end, while the Mortgage Bankers Association predicts a rate of 6.4%. I posit a more substantial relief, with the average rate falling to 5.5% by the close of 2026. This, if realized, will alleviate a significant burden on those entangled in the web of indebtedness.

These are not prophecies, but extrapolations based on a careful assessment of the prevailing conditions. The future, like a hall of mirrors, is subject to distortion and illusion. However, the evidence suggests that a significantly lower-rate environment in 2026 is not merely possible, but increasingly probable. The market, after all, is a relentless engine of adaptation, and its course is often determined by forces beyond our comprehension.

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2026-01-15 19:24