Bloomberg Daybreak: US Edition Instant Reaction: Jay Powell on Fed Policy
Dec 18, 2024
Neil Dutta, a renowned economist, joins the discussion following the Federal Reserve's latest policy decision. The conversation delves into the nuanced cuts to interest rates and the Federal Reserve's contrasting strategies regarding inflation forecasts. Dutta highlights the emerging divisions within the Fed and their impact on labor markets. They also explore currency fluctuations and new investment opportunities driven by changing monetary policies, all amidst an evolving economic landscape.
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Market Reaction to Fed Decision
- The Federal Reserve cut interest rates by 25 basis points, causing market turmoil.
- This move, coupled with upwardly revised inflation forecasts and reduced rate cut projections, led to significant drops in equities and a stronger dollar.
Disunity within the Fed
- The Federal Reserve seems divided on how to incorporate potential policy effects into their forecasts.
- Some members considered these effects, while others didn't, leading to uncertainty in the projections.
Potential Clash with Incoming Administration
- Neil Dutta believes the Fed's actions suggest a potential collision with the incoming administration.
- He points to the Fed's seemingly contradictory statements about cooling labor markets and reduced rate cuts.