By eFXdata — Dec 16 - 03:00 PM
Synopsis:
Barclays expects the Fed to cut rates by 25bp at this week’s December meeting, aligning with market pricing, while signaling a slower pace of cuts in 2025 and skipping a January move.
Key Points:
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December Cut Expected:
- Despite stronger US data compared to the September SEP, Fed officials have not pushed back against market expectations for a 25bp rate cut.
- A change in the Fed’s policy statement is likely, emphasizing a slower pace of cuts moving forward.
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Revised Dot Plot Projection:
- The 2025 dot plot may show only three cuts instead of four, with a risk of just two cuts.
- Policy path adjustments reflect more easing now in exchange for tighter policy later in 2025.
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Potential Dissent:
- Governor Bowman is expected to dissent again, reflecting possible internal divisions on the appropriate policy stance.
Conclusion:
Barclays anticipates a 25bp cut this week with the Fed signaling a slowdown in its easing path, likely skipping January while keeping the door open for fewer cuts in 2025.
Source:
Barclays Research/Market Commentary