The FOMC is expected to cut interest rates by 25 basis points with potential dissent, reflecting the tension between inflation risks and weakening employment.
Federal Reserve Chairman Jerome Powell is likely to emphasize data-driven policymaking ahead of January, while the new dot chart may still underestimate the influence of the incoming Trump administration's policies, reports Rabobank Senior US Strategist Philip Marey.
Powell is expected to downplay policy divisions.
"We expect the FOMC to cut the federal funds rate by 25 basis points to its target range of 3.50–3.75% from 3.75–4.00%. We also expect dissent, likely in the opposite direction."
"At the press conference, Powell is likely to downplay any dissent as arising from the challenging environment with rising inflation risks and declining employment risks. Regarding the January meeting, he is likely to emphasize that the Fed is data-driven and making decisions at each meeting."
"This new dot plot is interesting, but it may underestimate the impact of the Trump administration on the Fed next year. Going forward, we expect the Fed to continue its rate-cutting cycle at least until its neutral rate forecast is reached." (alg)
Source: FXstreet
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