Analyst: The Dot Plot is Where the Fed's Hawks are Most Likely to Show Their 'Claws'
Analyst Yohay Elam states that inflation is declining, but the recent pace has left many feeling uneasy, as data shows core CPI remains above 3%. There is a good reason for prices to continue accelerating, which is the strong economy and resilient job market. While current data provides the Fed with justification for a third consecutive rate cut, officials may hint that the pace of lowering borrowing costs will slow next year. The key to the market's initial reaction lies in the Fed's economic projections summary, known as the dot plot, where the Fed officials' forecasts on inflation, unemployment rate, economic growth, and interest rates are crucial. This is where the hawks may show their claws. Investors are concerned that the Fed will signal only two rate cuts in 2025. Fed Chair Powell's press conference may prove otherwise. He may alleviate worries and open the door for further rate cuts. In summary, the Fed's final interest rate decision in 2024 is a complex and highly volatile event.