CoinVoice recently learned that analyst Megan Leonhardt said that despite the failure to make progress in curbing inflation in November, federal funds futures show that the probability that Fed policymakers will cut the benchmark interest rate by another 25 basis points is almost 100%. The rationale for the rate cut may depend on the Fed officials' desire to keep the benchmark interest rate consistent with current economic conditions, as inflation has fallen sharply from its 2022 peak and the previously tight labor market is normalizing.
But don’t be surprised if next week’s rate cut is accompanied by Powell’s forward guidance suggesting the Fed will seek to pause rate cuts early in the year. Not only does the Fed have to keep inflation in check, but a number of fiscal policy outcomes over the coming year could change the direction of inflation. In addition, there are indeed pockets of weakness in the labor market that deserve a closer look. All of this presents directional challenges for the Fed in the coming months, and policymakers may want to avoid acting with alarming speed. [Original link]