Fed Rate Cut Likely in December Despite November Inflation Rise

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The likelihood of the Federal Reserve making a rate cut in December 2024 has increased despite the recent rise in inflation reported in November 2024. Here are the key points supporting this likelihood:

Market Expectations: Traders are highly confident that the Federal Reserve will cut interest rates. The probability of a rate cut next week has risen significantly, with Wall Street traders now assigning a 98% chance to this outcome. Additionally, 90% of economists polled by Reuters expect the Fed to cut interest rates by 25 basis points on December 18, 2024.

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Inflation Data: While inflation has increased, the rise is not significant enough to derail the Fed's plans for a rate cut. The Consumer Price Index (CPI) for November 2024 rose as forecast, which keeps the Fed on track for a rate cut. The core inflation is expected to end next year at 3.1%, which is relatively stable and supports the argument for a rate cut.

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Fed's Previous Actions: The Federal Reserve has already cut interest rates twice this year, by 0.25% in November and 0.50% in September. These actions were taken to address inflation and support the economy, and the Fed is likely to continue this trend in December.
Economic Optimism and Inflation Expectations: Consumers are expressing more optimism about their financial situations, and inflation expectations have ticked up slightly. This combination suggests that the economy is stable enough to handle a rate cut without triggering excessive inflation.
Expert Opinions: Experts are divided on the long-term impact of the rate cuts, with some casting doubt on the feasibility of further rate cuts in 2025. However, for the immediate future, the consensus leans towards a rate cut in December to continue supporting the economy.

In summary, despite the recent uptick in inflation, the Federal Reserve is likely to proceed with a rate cut in December 2024, driven by strong market expectations, stable inflation forecasts, and previous policy actions aimed at supporting economic growth.

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Fed Rate Cut Likely in December Despite November Inflation Rise

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Market Expectations: Traders are highly confident that the Federal Reserve will cut interest rates. The probability of a rate cut next week has risen significantly, with Wall Street traders now assigning a 98% chance to this outcome. Additionally, 90% of economists polled by Reuters expect the Fed to cut interest rates by 25 basis points on December 18, 2024.

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Inflation Data: While inflation has increased, the rise is not significant enough to derail the Fed's plans for a rate cut. The Consumer Price Index (CPI) for November 2024 rose as forecast, which keeps the Fed on track for a rate cut. The core inflation is expected to end next year at 3.1%, which is relatively stable and supports the argument for a rate cut.

Preview

Fed's Previous Actions: The Federal Reserve has already cut interest rates twice this year, by 0.25% in November and 0.50% in September. These actions were taken to address inflation and support the economy, and the Fed is likely to continue this trend in December.
Economic Optimism and Inflation Expectations: Consumers are expressing more optimism about their financial situations, and inflation expectations have ticked up slightly. This combination suggests that the economy is stable enough to handle a rate cut without triggering excessive inflation.
Expert Opinions: Experts are divided on the long-term impact of the rate cuts, with some casting doubt on the feasibility of further rate cuts in 2025. However, for the immediate future, the consensus leans towards a rate cut in December to continue supporting the economy.

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