Fed Experiences Multiple Policy Changes Throughout 2024
I reflect on the year, particularly regarding the recent FOMC meeting that surprised markets with its hawkish stance. Over the past year, the Fed has undergone significant shifts.
In winter 2024, elevated inflation prompted the Fed to reverse its dovish approach from fall 2023. In June, a hawkish dot plot suggested minimal cuts in 2024.
A concerning jobs report in August changed the narrative, leading the Fed to adopt a dovish position and implement a 50bps cut in September, starting a rate-cutting cycle. With a total of 100bps cut, the Fed has since turned hawkish again. The outlook for 2025 remains uncertain, predicting only two cuts next year.
This volatility exemplifies the confusion surrounding monetary policy changes. As January approaches with expectations of a pause and no February meeting, further flip-flopping is anticipated, along with potential for more cuts in 2025 being priced in during Q1.
As we enter the new year, expect continued fluctuations in Fed policy.
Happy holidays, and see you in 2025!