Credit Agricole anticipates a 25bp rate cut at the December FOMC meeting, lowering the fed funds target range to 4.25-4.50%. While this is broadly expected, a hawkish tone could emerge, with the Fed signaling slower cuts in 2025 amid resilient economic conditions and sticky inflation.
Key Points:
Expected Action:
- 25bp rate cut, marking the third consecutive reduction in 2024, totaling 100bp for the year.
- Market expectations and consensus align with this move.
Forward Guidance:
- Open-ended guidance likely, emphasizing a data-dependent approach.
- Chair Powell could hint at a possible pause in early 2025.
Economic Backdrop:
- November employment and inflation data suggest the Fed can proceed with a cut.
- Persistent inflation risks point to a slower easing cycle ahead.
Dot Plot Outlook:
- Potential upward revision in the 2025 median dot to 3.625% and 2026 to 3.125%.
- Implies 75bp of cuts in 2025 and 50bp in 2026, moderating from earlier projections.
Conclusion:
Credit Agricole expects the December FOMC to deliver a well-anticipated 25bp cut, accompanied by hawkish messaging. Forward guidance could highlight a cautious stance, suggesting a slower and more measured easing path in 2025.
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This article was written by Adam Button at
www.forexlive.com.
