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18 Dec 2024

Markets Brace for Fed’s “Hawkish Cut”

Financial markets are treading water this morning ahead of the year’s last Federal Reserve decision. US Treasury yields and the dollar are holding in narrow trading ranges, equity markets are pushing higher, and commodity prices are moving sideways. Market participants are nearly unanimous in expecting the Fed to deliver a “hawkish cut” this afternoon. After a series of data releases showing labour markets losing momentum and inflation holding steady, policymakers are widely believed likely to lower the federal funds target range by a quarter point to 4.25-4.50 percent – but the “dot plot” summary of economic projections is seen signalling...

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Markets in the Fed’s hurt locker

• US Fed. Another rate cut was delivered but the US Fed signaled a shallower easing path ahead. US yields rose & the USD strengthened.• AUD & NZD. The stronger USD has seen the AUD & NZD tumble to levels last traded in Q4 2022. AUD also lost ground on most major crosses.• Overdone? A firmer USD is expected over H1 2025. But the extent of the post-US Fed reaction looks a little excessive, in our opinion. The US Fed was in the spotlight this morning, and adjustments made by policymakers have cascaded through markets. As expected, the US Fed...

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Fed Out-Hawks Markets, Adds Upward Momentum to Dollar

As had been widely anticipated, the Federal Reserve cut its benchmark borrowing rate by a quarter percentage point this afternoon, while also telegraphing a dramatically slower pace of easing in 2025. The Federal Open Market Committee voted by an 11-to-1 margin to lower the target range for the federal funds rate to 4.25 to 4.50 percent, with the Cleveland Fed’s Beth Hammack dissenting in favour of a hold. In the statement setting out the decision, officials made only one major change that we can see: in place of a sentence that previously said “In considering additional adjustments to the target...

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