FREELAND: CANADA WON'T ESCALATE OR BACK DOWN ON US TRADE FIGHT

MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI BRIEF: China Nov M1 Decline Narrows, M2 Slows

EZ/UK T-Bill Calendar: 8/13/28/50-Week BTF Auction on Monday

EZ/UK Bond Supply Calendar: 4.125% Jul-29 Gilt Due on Tuesday

MNI: CANADA OCT WHOLESALE SALES +3.3%; EX-AUTOS +0.5%

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

FED: MNI Fed Preview-Dec 2024: Greater Caution, Flatter Rate Path

FED
USEM BulletFederal ReserveCentral Bank NewsEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange BulletsNorth America

Our preview of the December 17-18 FOMC meeting has been published (PDF here):

  • The latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) on Dec 18, but macro and political developments have heightened uncertainty over its the next moves.
  • With the unemployment rate likely to undershoot September’s median projection along with core PCE inflation and GDP growth overshooting, the FOMC will undoubtedly signal a more cautious approach to easing.
  • This will be communicated most clearly in the updated Dot Plot, which is set to show 75bp of cuts in 2025 – 25bp less than the 100bp in the last edition - with 2026, 2027, and the Longer-Run dot in line for increases.
  • The hawkish risk at this meeting comes not just from a potential signalling of just 50bp of cuts in 2025, but negative market reaction to a higher terminal rate forecast, with a funds rate that settles above 3%.
  • The new forecasts are not likely to explicitly incorporate anticipated policy shifts under the incoming Trump administration, but as with the corresponding post-election meeting in 2016 we expect the FOMC to discuss the macro and rates implications, with more participants seeing upside risks to inflation and rates.
  • This could result in a hawkish flavor to the communications tone. While Chair Powell is unlikely to rule out a cut at the next meeting in January, reiterating that the Fed is moving meeting-by meeting while remaining confident inflation remains on a path to 2%, expect him to emphasize increasing uncertainty over the path ahead.
  • Another area to watch includes a likely technical adjustment to an administered rate (ON RRP), though discussion on halting QT will probably not escalate until at least early 2025.
286 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

Our preview of the December 17-18 FOMC meeting has been published (PDF here):

  • The latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) on Dec 18, but macro and political developments have heightened uncertainty over its the next moves.
  • With the unemployment rate likely to undershoot September’s median projection along with core PCE inflation and GDP growth overshooting, the FOMC will undoubtedly signal a more cautious approach to easing.
  • This will be communicated most clearly in the updated Dot Plot, which is set to show 75bp of cuts in 2025 – 25bp less than the 100bp in the last edition - with 2026, 2027, and the Longer-Run dot in line for increases.
  • The hawkish risk at this meeting comes not just from a potential signalling of just 50bp of cuts in 2025, but negative market reaction to a higher terminal rate forecast, with a funds rate that settles above 3%.
  • The new forecasts are not likely to explicitly incorporate anticipated policy shifts under the incoming Trump administration, but as with the corresponding post-election meeting in 2016 we expect the FOMC to discuss the macro and rates implications, with more participants seeing upside risks to inflation and rates.
  • This could result in a hawkish flavor to the communications tone. While Chair Powell is unlikely to rule out a cut at the next meeting in January, reiterating that the Fed is moving meeting-by meeting while remaining confident inflation remains on a path to 2%, expect him to emphasize increasing uncertainty over the path ahead.
  • Another area to watch includes a likely technical adjustment to an administered rate (ON RRP), though discussion on halting QT will probably not escalate until at least early 2025.