Bloomberg Surveillance Instant Reaction: The Fed Decides
Dec 18, 2024
The latest Federal Reserve interest rate cut sparks debate over dissenting opinions and future forecasts. Market reactions reveal a stronger dollar and shifting equity prices, while internal disagreements among Fed members highlight the complexities of monetary policy. The podcast also dives into updated economic forecasts, rising inflation expectations, and the impact on the labor market. Experts discuss the challenges of balancing economic indicators and the need for innovative inflation forecasting strategies.
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Fed Decision and Market Reaction
- The Federal Reserve implemented a 25 basis point cut, surprising some analysts.
- Their forecast for 2025 includes two rate cuts, down from four previously projected, strengthening the dollar and impacting bond yields.
Hawkish Cut and Market Adjustment
- This is a hawkish cut, with 100 basis points of cuts since September but only two more baked in.
- The market is readjusting to the Fed’s new projections without panicking.
Economic Strength and Mar-a-Lago Considerations
- The Fed acknowledges the strong economy and questions further rate cuts.
- They consider the discussions at Mar-a-Lago, which are not expected to be disinflationary.