The US Federal Reserve is set to release its next policy decision on December 18, with a widely anticipated interest rate cut of 0.25%. This move is expected to be significant, given the recent trends in economic data and market expectations.
The upcoming Fed meeting will also include the release of quarterly Federal Open Market Committee (FOMC) forecasts, which are closely watched by investors and economists. These projections provide insight into the Fed’s future interest rate decisions and their impact on the economy.
According to the CME FedWatch Tool, the chance of a 0.25% rate cut was 96% as of December 15. The FOMC projections will be released along with the policy statement, providing an opportunity for investors to gauge the Fed’s stance on future interest rates and inflation.
The impact of the Fed’s decision on markets is significant, particularly given the last major data point of the year and expected holiday season market volumes. Investors and economists are closely watching the FOMC projections, including the dot plot, which shows anonymized individual FOMC member forecasts of future interest rates.
While some expect more rate cuts, others believe policy projections will remain largely unchanged. If the projections reflect fewer and/or slower rate cuts, bond yields and the dollar could rise, while equities and industrial metals prices might fall under pressure. However, if the projections remain relatively unchanged, equities and bond prices could benefit from the expected easing of interest rates.
The decision by the Fed will have a significant impact on markets, making it essential to monitor the FOMC projections and any subsequent press conference by Fed Chair Jerome Powell.
Source: https://www.forbes.com/sites/jasonschenker/2024/12/15/markets-expect-a-december-fed-rate-cut-but-future-policy-is-uncertain