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FOMC rate decision takes center stage today
The Federal Reserve is expected to announce a 25bps rate cut today, shifting market attention to updated economic projections, with a key focus on the pace of easing in 2025 and the neutral rate outlook.
Fed expected to cut rates by 25bps to 4.25%-4.50%.
UK inflation rose to 2.6% in November.
Eurozone inflation hit 2.2%, core CPI eased to 2.7%.
The Federal Reserve is set to announce its rate decision today, with a 25bps cut widely expected, bringing the federal funds rate to 4.25%–4.50%. Markets see virtually no chance of a deviation, shifting attention to Fed Chair Jerome Powell’s statement and updated economic projections.
Key focus areas:
- Pause in January?
Markets price an 84% chance of no rate change at January meeting. The voting split within the FOMC may indicate how close policymakers are to pausing the easing cycle. - Pace of easing in 2025:
Previous projections suggested a median rate of 3.4% by the end of 2025. Markets currently see a 33% chance of rates falling to 3.75%–4.00%. Any upward revision in the Fed’s median forecast could highlight inflation concerns and a tighter monetary stance. - Neutral rate:
The long-term neutral rate is projected at 2.9%, slightly above 2.8% in June. A move above 3% would signal higher baseline expectations for economic growth and inflation stability post-tightening.
UK inflation rises for the second month
The UK’s annual inflation rate increased to 2.6% in November, up from 2.3% in October, in line with forecasts. It marks the highest inflation rate in eight months, driven by rising costs for recreation and culture, housing and utilities, and food, while transport prices fell less than before. Services inflation remained steady at 5%.
Eurozone inflation updates
- Headline CPI: Finalized at 2.2% y/y for November, up from October’s 2.0%.
- Core CPI: Eased to 2.7% y/y, down from 2.9% in October.
