Source: Jinshi Data

Wall Street Analysts widely believe that the Federal Reserve may hint at a readiness to pause interest rate cuts in this week's meeting, which would cloud the outlook for interest rates.

The Federal Reserve will hold its last FOMC meeting of the year on Tuesday. Although the market is almost certain it will cut rates by 25 basis points, the outlook for January and beyond remains unclear.

According to analysis from Yardeni Research, Fed Chairman Powell will convey to investors in the post-meeting press conference that the next interest rate decision will be to pause rate cuts.

Yardeni Research stated in a report last Sunday: "Since a full 100 basis points of rate cuts on September 18, we expect Powell to signal in the post-FOMC press conference that the Fed will temporarily pause further easing."

A resilient and continuously strengthening economy is a key reason why the Fed might allow the December rate cut to be the last cut for some time.

The Atlanta Fed's GDPNow forecast shows that the annualized growth rate of the US economy in the fourth quarter will reach 3.3%.

Coupled with the inflation trends that have begun to reverse in recent months, Yardeni Research believes that further rate cuts by the Fed could have negative consequences.

(The Federal Reserve) will not lower interest rates again early next year not only because economic growth and inflation remain strong, but also because further rate cuts could amplify both.

Goldman Sachs Chief Economist Jan Hatzius recently held a similar view. In a report last Sunday evening, he stated, "We expect the main message from the December meeting to be that the FOMC anticipates possibly slowing the pace of rate cuts in the future."

Hatzius has removed expectations for a rate cut by the Federal Reserve in January next year, now projecting only two cuts in 2025, each by 25 basis points.

The futures market also supports this idea. According to the CME FedWatch tool, the likelihood of a Federal Reserve rate cut in January next year is only 15%.

However, Apollo Global Management Chief Economist Torsten Sløk believes the Federal Reserve may take a further step next year by raising rates to shock the market, and this is all related to inflation.

"Recent inflation data show signs that the decline in inflation has stalled, and there is a risk of acceleration," Sløk said last Sunday, adding that inflation could replicate the scenario of the 1970s.

He stated, "The recent upward trend in inflation, coupled with strong economic momentum, suggests that inflation will rebound in 2025, which does not justify a rate cut by the Federal Reserve. The likelihood that the Federal Reserve may have to raise rates in 2025 is increasing."

CME FedWatch tool shows that the market believes there is only a 0.1% chance of a rate hike by the Federal Reserve next year.

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编辑/jayden