Dec 15th, 2024
The Federal Reserve is set to convene its final meeting of 2024 on December 17-18, with strong expectations of a 25 basis point interest rate cut. This anticipated adjustment would bring the federal funds target range to 4.25%-4.5%, marking the third such reduction this year as the Fed continues its efforts to manage economic growth and inflation.
Market consensus reflects a high probability of this rate cut, with futures markets indicating a 97% chance of the adjustment. This sentiment is further supported by recent statements from Federal Reserve officials, including Governor Christopher Waller, who has expressed an inclination toward a December rate cut.
In addition to the rate decision, investors will closely analyze the Federal Open Market Committee's (FOMC) updated economic projections and Chair Jerome Powell's commentary for insights into the Fed's outlook for 2025. Key economic indicators, such as the personal consumption expenditures (PCE) inflation index and revised third-quarter GDP figures, will also be released this week, providing further context for the Fed's policy direction.
The anticipated rate cut comes amid a backdrop of a 27% rise in the stock market this year, though concerns about a potential correction persist. The S&P 500 has experienced a record losing streak in value stocks, and the Dow has logged its longest decline since February 2020. Despite expectations of year-end gains from holiday shopping, experts anticipate market turbulence in 2025.
As the Fed prepares for its final meeting of the year, market participants will be attuned to any signals regarding the trajectory of monetary policy, especially in light of ongoing economic uncertainties and the potential for future rate adjustments.
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