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25 Basis Points Cut Likely Today with 96% Probability

US Federal Reserve’s Anticipated Rate Cut

Today marks the final meeting of the US Federal Reserve for the year 2024, and all eyes are on the potential outcomes that may emerge. A significant announcement is expected, with a focus on the possible implementation of a 25 basis points interest rate cut. This decision is poised to have considerable implications for the economy, influencing various sectors and financial markets.

According to data from Kalshi, there is a staggering 96% probability that the Federal Reserve will proceed with this anticipated rate cut. Throughout 2024, the Fed has already executed two rate cuts. Should this new rate cut be confirmed, it would culminate in a total reduction of 100 basis points for the year.

Rising US Inflation Metrics

In recent months, inflationary pressures have intensified, complicating the Federal Reserve’s efforts to stabilize the economic environment. At the beginning of the year, the US Consumer Price Index (CPI) stood at 308.417 points. By April, it had increased to 313.55 points, and in October, it reached its annual peak of 315.66 points. November saw a slight decline to 315.49 points, reflecting ongoing volatility.

The US Producer Prices Index has also shown a steady upward trajectory. Starting at 142.683 points in January, it climbed to 144.834 points by June and continued to rise, reaching a high of 146.493 points in November. Similarly, the US Personal Consumption Expenditure Price Index began the year at around 122.115 points and rose consistently, peaking at 124.266 points in October.

Challenges in the US Labor Market

The weakening US job market has been a significant factor prompting policymakers to consider a rate cut. Although some improvements were noted earlier in the year, the situation has recently deteriorated. The Initial Jobless Claims index, for instance, was at 224,000 on November 30 but rebounded to 242,000 in the first week of December, indicating a return to levels seen eight weeks prior.

Furthermore, the Continuing Jobless Claims index increased from 1.87 million on November 23 to 1.89 million by the end of November, highlighting ongoing challenges in the labor sector.

Outlook for 2025

As we look ahead to 2025, understanding the Federal Reserve’s strategic direction becomes crucial. With a new administration set to take office in late January, the primary challenge will be striking a balance between controlling inflation and fostering economic growth. The incoming government will need to navigate these complex dynamics to ensure sustainable development and financial stability.

The year 2025 is likely to bring both opportunities and challenges, requiring careful consideration of fiscal and monetary policies to address the evolving economic landscape.

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