Bloomberg Surveillance Instant Reaction: Jay Powell on Fed Policy
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Dec 18, 2024 The discussion centers on the Federal Reserve's recent decision to lower interest rates by 25 basis points amid inflation worries. Insights into the conflicting views on economic policy and inflation forecasts take center stage. The conversation then shifts to the effects of a strong dollar on emerging markets. There's a deep dive into how rising uncertainty influences investment strategies, along with a focus on market selloff impacts and the importance of mental health during tumultuous times.
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Market Reaction to Fed Decision
- The Federal Reserve cut interest rates by 25 basis points, a move questioned due to inflation remaining above target.
- The market reacted negatively, with equities falling and bond yields rising, indicating a shift in market sentiment.
Uncertainty in Fed Forecasting
- The Fed's decision-making process seems less clear, with some members incorporating "highly conditional estimates" into forecasts.
- This lack of clarity and potential political influence adds uncertainty to the Fed's actions.
Fed on Collision Course?
- Neil Dutta suggests the Fed's actions seem to be at odds with incoming administration, potentially "tempting fate."
- He notes the Fed is dialing back rate cuts despite acknowledging a cooling labor market.