At 3:00 a.m. Beijing time on Thursday, the Federal Reserve will announce the December interest rate decision that has attracted much attention from investors. Fed Chairman Powell will deliver a speech at the regular press conference half an hour later (3:30) as usual. At present, the industry generally expects that the Federal Reserve will cut interest rates by another 25 basis points at this week's meeting, and there is almost no suspense.
This will also be the third consecutive meeting of the Federal Reserve to announce a rate cut after September and November, and the cumulative rate cut for the whole year is expected to reach 100 basis points.
Highlights of tonight’s Fed decision①: Will it hint at a pause in interest rate cuts in January?
Judging from tonight's interest rate decision, one of the points that investors are most concerned about is undoubtedly whether the Federal Reserve will hint at suspending interest rate cuts in January.
If it feels necessary, the Fed is entirely possible to make some subtle hints in its post-meeting policy statement. Of course, Fed Chairman Powell is also likely to talk about this topic actively or passively (when asked by reporters) at the press conference after the meeting.
According to CME's FedWatch tool, traders currently expect the Fed to have only a 16.3% chance of further cutting interest rates to 4.00%-4.25% in January.
Highlights of tonight’s Fed decision ②: How many times can interest rates be cut next year?
In addition to whether it will hint at a delay in interest rate cuts in January, another aspect of the Fed's decision tonight that can directly reflect the "hawkish" attitude of officials is undoubtedly the Fed's interest rate dot chart, which is released every quarter. This famous key chart may answer two topics that the market is particularly concerned about: How many times will the Fed cut interest rates next year? What exactly is the ideal neutral interest rate that the Fed currently believes?
Overall, we can draw a basic conclusion from these investment bank forecasts: if the Fed's dot plot tonight reduces the number of rate cuts next year to three, it is roughly in line with expectations. If it is further reduced to two, it will be a more hawkish result. Another detail worth noting is that the Fed's estimate of long-term interest rates may be further raised to 3%.
Finally, there is actually an interesting suspense in tonight’s Federal Reserve decision. That is, as the last interest rate meeting before Trump takes office, will Powell comment on the impact of Trump’s 2.0 policy?
