US Fed Rate Cut: Powell to signal fewer rate cuts in 2025 at FOMC meeting today?

The most significant and closely monitored signal for global investors is the US interest rate. The Federal Reserve FOMC meeting is currently underway and the US Federal Reserve is set to announce its monetary policy decision today.

Today, the US Fed dot plot will also be revealed as the FOMC meeting is associated with a Summary of Economic Projections.

Markets expect the US Fed to cut rates by 25 bps after cutting rates by 50 bps and 25 bps in its previous two meetings. However, going forward, the Federal Reserve is expected to make fewer interest rate cuts in 2025 than previously anticipated.

Nigel Green, CEO of deVere Group, warns investors to act cautiously and reassess their portfolios due to mounting evidence suggesting the Federal Reserve will not cut interest rates in 2025.

Investors are eagerly anticipating Fed chair Powell’s news conference today, as they are seeking clues to understand the current economic situation. Powell may announce that the Fed will pause rate cuts to accelerate inflation-fall to 2%, possibly during a post-meeting statement or Powell’s post-news conference.

If the Fed cuts the rate by 25 bps today, the rate would be a 1 percent or 100 bps below the four-decade high it reached in July 2023.

Inflation remains above the Fed’s 2% target, prompting a shift to a more gradual approach to rate cuts in 2025, despite a drop below 9.1% in mid-2022.

Inflation data showed headline and core CPI rises by 0.3% in November, with core inflation remaining steady at 3.3%. Overall inflation increased from 2.6% to 2.7% due to higher shelter costs and producer price inflation increased from 0.3% to 0.4%.

Weekly jobless claims reached a two-month high of 242,000, partly due to Thanksgiving seasonal factors, indicating increased difficulty for job seekers.

Meanwhile, U.S. stocks are showing divergence as most major indexes are declining, while the Nasdaq Composite has reached a record high, surpassing the 20,000 mark for the first time.

The S&P 500 is up roughly 27% in 2024, following a 22% rise in 2023. The Nasdaq’s rise of more than 30% this year follows a 40% increase in 2023.

The Fed’s aggressive rate-cutting actions could potentially increase inflation, while a delay in rate cuts could potentially harm the economy. Powell may face greater challenges in navigating the interest rate path in 2025. The FOMC is expected to take a break before the rate cut scenario resurfaces next year.