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MNI Fed Preview - Dec 2024: Analyst Outlook

Analysts are unanimous in expecting a 25bp rate cut from the FOMC, but there are varying opinions on rates ahead.
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EXECUTIVE SUMMARY: 

  • Analysts are unanimous in expecting a 25bp rate cut from the FOMC this week, but there are varying opinions on the path of rates ahead and the number of cuts that the Fed will signal in its Dot Plot for 2025.
  • Economic Projections/Dot Plot: The median analyst sees the FOMC rate “dot” for 2025 to be upped by 25bp (ie one less cut) from the September edition, to 3.6%. There is a range of opinions though, including unchanged at 3.4% and upped by 50bp to 3.9%.
  • Analysts are almost unanimous that the longer-run Dot will be raised from 2.9%, to either 3.0% or 3.1%.
  • Likewise, virtually all analysts who expressed an view on the topic said they expected 2024 real GDP growth and PCE inflation forecasts to be raised, with unemployment lowered.
  • The most interesting single economic projections expectation was BofA who see the longer-run GDP forecast raised to 2.0% from 1.8%.
  • Statement: There are only very limited expectations for Statement changes; Deutsche for example expects a more cautious tone to be codified in the forward guidance.
  • A 5bp downward adjustment in the offer rate on the overnight reverse repo facility is expected by most analysts who expressed a view, though a couple see it more likely such a decision is made later.
  • Expected Rate Path: While the median analyst sees 75bp of cuts in 2025, we’ve seen estimates ranging from 125bp (multiple analysts) to zero (Deutsche). Some see the easing cycle stalling in 1H 2025, or (as noted with Deutsche) for the year altogether, but many see it resuming either later in 2025 or in 2026.

Note to readers: This update of our Dec 13 preview includes analyst expectations (Starting Page 28)

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EXECUTIVE SUMMARY: 

  • Analysts are unanimous in expecting a 25bp rate cut from the FOMC this week, but there are varying opinions on the path of rates ahead and the number of cuts that the Fed will signal in its Dot Plot for 2025.
  • Economic Projections/Dot Plot: The median analyst sees the FOMC rate “dot” for 2025 to be upped by 25bp (ie one less cut) from the September edition, to 3.6%. There is a range of opinions though, including unchanged at 3.4% and upped by 50bp to 3.9%.
  • Analysts are almost unanimous that the longer-run Dot will be raised from 2.9%, to either 3.0% or 3.1%.
  • Likewise, virtually all analysts who expressed an view on the topic said they expected 2024 real GDP growth and PCE inflation forecasts to be raised, with unemployment lowered.
  • The most interesting single economic projections expectation was BofA who see the longer-run GDP forecast raised to 2.0% from 1.8%.
  • Statement: There are only very limited expectations for Statement changes; Deutsche for example expects a more cautious tone to be codified in the forward guidance.
  • A 5bp downward adjustment in the offer rate on the overnight reverse repo facility is expected by most analysts who expressed a view, though a couple see it more likely such a decision is made later.
  • Expected Rate Path: While the median analyst sees 75bp of cuts in 2025, we’ve seen estimates ranging from 125bp (multiple analysts) to zero (Deutsche). Some see the easing cycle stalling in 1H 2025, or (as noted with Deutsche) for the year altogether, but many see it resuming either later in 2025 or in 2026.

Note to readers: This update of our Dec 13 preview includes analyst expectations (Starting Page 28)

Keep reading...Show less