As the Fed stays put, markets bet on timing of rate cuts
Dec 15, 2023
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The podcast discusses the takeaways from the latest Fed meeting and the market's response, including the debate about future rate cuts. They also touch on the expected timing of rate cuts and potential changes in statements from central banks. The upcoming Bank of Japan meeting and possible shift away from negative interest rate policy are examined. The Federal Reserve's role in achieving a soft landing for the economy, the fight against inflation, and the impact of AI in 2024 are also explored.
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Quick takeaways
The Federal Reserve's recent announcement to hold interest rates steady and indicate three rate cuts in 2024 has generated strong market response.
While the Federal Reserve took a dovish stance, other central banks like the European Central Bank (ECB), Bank of England, and Bank of Japan demonstrated varying degrees of willingness to cut rates.
Deep dives
Federal Reserve's Dovish Stance on Rate Cuts
The Federal Reserve's recent announcement to hold interest rates steady and indicate three rate cuts in 2024 has generated strong market response. Chair Powell's press conference emphasized a dovish outlook, expressing concern about waiting too long to cut rates and highlighting the need to lower rates before inflation reaches 2%. The discussion around rate cuts is expected to be actively debated in Q1.
Central Banks' Actions and Market Outlook
While the Federal Reserve took a dovish stance, other central banks like the European Central Bank (ECB), Bank of England, and Bank of Japan demonstrated varying degrees of willingness to cut rates. The ECB set plans to reduce its balance sheet in 2024, paving the way for discussions on rate cuts in Q1. The Bank of England had a less dovish attitude, but it is likely to follow the Fed and ECB in implementing rate cuts. The Bank of Japan may not make immediate policy changes but is expected to exit the negative interest rate policy in Q1. Overall, the markets show optimism for 2024, with a positive growth-inflation mix and an expectation of continued disinflation.
Has the Fed officially achieved a soft landing? Josh Schiffrin, global head of trading strategy in Goldman Sachs Global Banking & Markets, discusses the takeaways from the latest Fed meeting and what’s next for markets in 2024.