{"id":64648,"date":"2025-12-14T06:49:35","date_gmt":"2025-12-14T06:49:35","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/a-hawkish-cut-a-split-house-and-a-fed-chair-on-borrowed-time\/"},"modified":"2025-12-14T06:49:35","modified_gmt":"2025-12-14T06:49:35","slug":"a-hawkish-cut-a-split-house-and-a-fed-chair-on-borrowed-time","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/a-hawkish-cut-a-split-house-and-a-fed-chair-on-borrowed-time\/","title":{"rendered":"A hawkish cut, a split house, and a Fed Chair on borrowed time"},"content":{"rendered":"

(Originally posted on : Federal Reserve System News, Latest Stories & Analysis | Invezz )<\/b>
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\u2018Tempus fugit, \u2019 as we cry out at closing time in my local Wetherspoons. <\/p>\n

We\u2019re already more than a quarter of the way through December and speeding at full throttle towards year-end. <\/p>\n

Where has the time gone? The Federal Reserve has just held its last meeting of 2025 and cut interest rates by 25 basis points, as expected. <\/p>\n

Ahead of the decision, analysts were calling for a \u2018hawkish cut\u2019, and that is pretty much what was delivered. <\/p>\n

The FOMC\u2019s \u2018Dot Plot\u2019 (part of the quarterly Summary of Economic Projections) had a median forecast of just one-quarter-point cut next year, probably in the first half. <\/p>\n

But there was a great deal of dispersion across the dots. <\/p>\n

Out of the nineteen FOMC members, one anticipates six cuts next year (that would take the Fed Funds rate down to 2.00-2.25% from current levels, well below inflation forecasts), while at the other end, three members see one rate hike. <\/p>\n

According to the CME\u2019s FedWatch Tool, the \u2018real money\u2019 sees one, maybe two reductions, which is pretty much in line with the Fed itself. <\/p>\n

We now have another twelve months to go before we\u2019ll know how accurate this prediction turns out to be.<\/p>\n

The Fed\u2019s current rate-cutting cycle began back in September 2024 when they surprised most people by announcing a 0.50% reduction. <\/p>\n

This was double the forecasts, and somewhat controversial given that it came just two months before the Presidential Election. <\/p>\n

The Fed made two further quarter-point cuts before the year-end, before going on hold until this September, blaming the possible inflationary effects of tariffs. <\/p>\n

This drew the ire of President Trump, who felt that the US central bank had politicised monetary policy, and he may have a point. <\/p>\n

Overall, rates were reduced by 100 basis points last year, and a further seventy-five points in 2025, for a total of 175, taking the Fed Funds rate range down to 3.50-3.75%, its lowest in over three years. <\/p>\n

All that monetary stimulus was a pretty powerful tailwind for risk assets, which, given yesterday\u2019s forecast, will lose a lot of its force going forward. Despite this, the FOMC vote breakdown shows little appetite for raising rates, so that\u2019s a blessing.<\/p>\n

The rest of the FOMC\u2019s Summary was also quite upbeat. Members upgraded their growth outlook for next year. <\/p>\n

They now expect GDP growth of 2.3%, up from 1.8% in September. <\/p>\n

Inflation (as measured by Core PCE) is expected to moderate to 2.5% by the end of 2026, down from its current reading of 2.8% annualised, and below September\u2019s prediction of 2.6%. It is still expected to hit the Fed\u2019s 2% target in 2028. <\/p>\n

Meanwhile, Unemployment is forecast to hold steady at 4.4%, which remains historically low. <\/p>\n

All in all, that\u2019s a fairly solid set of forecasts, which was enough to see risk assets rally and the US dollar fall. <\/p>\n

In his subsequent press conference, Chair Jerome Powell said that the Fed was now in \u2018wait and see\u2019 mode, as is Mr Powell himself. <\/p>\n

His second term as Chair ends in May, yet speculation over the identity of his successor has been swirling around since President Trump\u2019s inauguration in January. <\/p>\n

Mr Trump has said he has decided on his preferred candidate, and Treasury Secretary Scott Bessent has suggested that this could be announced before Christmas. <\/p>\n

Kevin Hassett, the current Director of the National Economic Council, is considered the shoo-in candidate. <\/p>\n

He\u2019s a well-known Trump supporter and a well-known dove. <\/p>\n

But Kevin Warsh can\u2019t be ruled out either. He has served as a member of the Federal Reserve Board of Governors and is a Republican. <\/p>\n

He\u2019s also a handsome chap, which may give him an edge over Mr Hassett in President Trump\u2019s eyes. Let\u2019s keep the Administration beautiful.<\/p>\n

What does all this mean? Well, there\u2019s some uncertainty creeping in over at the Fed, and evidence of growing diversity of expressed opinions. <\/p>\n

It also feels as if the rule of the Chair won\u2019t be quite as absolute as it has been in the past. <\/p>\n

These aren\u2019t bad things. It\u2019s time that the Fed had a bit of a shake-up. But once his replacement is named, Jerome Powell\u2019s life is going to get a lot harder. <\/p>\n

There will effectively be two Fed Chairs for the next five months, and both will be scrutinised intensely. <\/p>\n

Disagreements will be highlighted. And that has the potential to affect decision-making negatively.<\/p>\n

(David Morrison is a Senior Market Analyst at\u00a0Trade Nation. Views are his own.)<\/p>\n<\/p><\/div>\n

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(Originally posted on : Federal Reserve System News, Latest Stories & Analysis | Invezz ) \u2018Tempus fugit, \u2019 as we cry out at closing time in my local Wetherspoons. We\u2019re already more than a quarter of the way through December and speeding at full throttle towards year-end. Where has the time gone? The Federal Reserve […]<\/p>\n","protected":false},"author":3947362379,"featured_media":64649,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[37],"tags":[],"_links":{"self":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts\/64648"}],"collection":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/users\/3947362379"}],"replies":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/comments?post=64648"}],"version-history":[{"count":0,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts\/64648\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/media\/64649"}],"wp:attachment":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/media?parent=64648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/categories?post=64648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/tags?post=64648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}