Today marks a significant event as the US Federal Reserve convenes for its final meeting of the year 2024. This gathering is anticipated to bring forth critical announcements that could influence the economic landscape. Among the expected outcomes is a probable 25 basis points interest rate cut. Let’s delve into the potential implications of this meeting.
US Fed Expected to Cut Rates Again
Market analysts are closely watching the Federal Reserve’s actions, with Kalshi projecting a 96% likelihood of a 25 basis points rate cut at today’s meeting. This year, the Fed has already implemented multiple rate cuts, and the anticipated adjustment would bring the total reductions for 2024 to 100 basis points. Such moves reflect the Fed’s strategy to navigate the economic challenges faced throughout the year.
US Inflation Metrics Back on the Rise
The inflationary pressures in the United States have surged significantly over recent months, complicating the Federal Reserve’s efforts to stabilize the economy. At the beginning of the year, the Consumer Price Index (CPI) stood at 308.417 points, rising to 313.55 points in April, and reaching a peak of 315.66 points in October. Although there was a slight dip to 315.49 points in November, inflation remains a pressing concern.
Similarly, the Producer Prices Index (PPI) commenced the year at 142.683 points, climbing to 144.834 points by June and continuing its upward trajectory, peaking at 146.493 points in November. The Personal Consumption Expenditure Price index also mirrored this trend, beginning at 122.115 points and rising to 123.931 points in September, before hitting 124.266 points in October.
US Labour Market Challenges
The challenges in the US labor market have been a significant factor in the Federal Reserve’s consideration of a rate cut. Initially showing signs of improvement, the job market has recently faced setbacks. The Initial Jobless Claims index was recorded at 224K at the end of November, increasing to 242K in the first week of December, marking a return to figures witnessed eight weeks prior. Concurrently, the Continuing Jobless Claims index rose from 1.87K to 1.89K thousand on November 30.
What to Expect for 2025
Looking ahead to 2025, the economic landscape is poised for significant changes as a new administration takes charge in the White House in late January. The primary focus for the incoming government will be to strike a balance between controlling inflation and fostering economic growth. This delicate equilibrium will be crucial in shaping the US economy’s trajectory in the upcoming year, with the Federal Reserve playing a pivotal role in these efforts.
