The Federal Reserve delivered a more hawkish-than-expected stance at its December meeting, surprising markets with its forward guidance. While the widely anticipated rate cut was delivered, expectations for further cuts in 2023 were dashed, raising the risk that a January cut is now off the table. The Fed's projections now indicate just two rate cuts in 2025, compared to previous forecasts of four cuts. This hawkish tilt is attributed to the potential impact of trade, immigration, and fiscal policy changes, leading to a firmer inflation and policy rate path.
Investing.com -- The Federal Reserve delivered a hawkish present to markets at its December meeting ahead of the holidays as the widely expected rate cut in December was served up with forward guidance that caught markets by surprise, raising the risk that a January cut is now firmly off the Fed's monetary policy table.
At the December press conference, Fed chairman Jerome Powell suggested that some members had filtered the possible impact of fiscal policy changes from the incoming Trump administration. In the summary of economic projections, Fed members forecast inflation to reach the 2% target later than previously expected, with core PCE inflation revised to 2.5% for next year, up from a prior estimate in September for 2.2%.
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