The Federal Open Market Committee is expected to cut interest rates by 25 basis points with potential opponents, reflecting the tension between inflation risks and weak employment. Federal Reserve Governor Jerome Powell is likely to emphasize reliance on data heading into January, while the new dot chart may still understate the policy impact of the incoming Trump administration, said Philip Marey, chief US strategist at Rabobank.
Powell expected to downplay the importance of division in politics
“We expect the FOMC to make a 25 basis point cut to the target range for the federal funds rate to 3.50-3.75% from 3.75-4.00%. We also expect opposition, perhaps in opposite directions.”
“At the press conference, Powell will likely downplay any dissent as something that stems from a challenging situation with upside inflation risks and downside employment risks. Regarding the January meeting, he will likely emphasize that the Fed is data-driven and makes decisions meeting-by-meeting.”
“The new dot plot will be interesting, but it may understate the Trump administration’s influence on the Fed next year. Looking ahead to next year, we expect the Fed to continue its tapering cycle at least until its neutral rate estimate is reached.”
