• Notes from the Desk | FOMC Meeting - Release the Hounds

Notes from the Desk | FOMC Meeting – Release the Hounds Dec 13 2023

Notes From the Desk – FOMC Meeting – Release the Hounds


As expected, the FOMC kept the policy rate unchanged at 5.25-5.5%.  The far more interesting items were buried in their press release and conference.


The dot-plot thickens.


  • No further hikes are indicated.
  • A rate cut was added to 2024 for a total of 75 bps.
  • 100 bps of rate cuts are forecast for 2025.


But more importantly. 

While the headlines will focus on the infamous ‘dot-plot’, we think the more interesting development was their forecast for core-PCE (the Fed’s favourite inflation measure).


  • 2024 core-PCE lowered from 2.6% to 2.4% and moving down to 2.1% in 2025.
  • Inflation expectations lowered with a minimal change to growth and unemployment.


The Implications.

In our opinion, this is very clearly a shift in stance from hawkish to neutral.


  • With the disinflation process underway, it suggests that weaker economic growth would be met with more aggressive rate cuts than currently forecast.
  • Rates have dropped 13-28 bps, led by 2y yields.
  • Unless inflation reaccelerates, we expect any increase in rates to be met by buyers.
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