On Thursday morning Beijing time, the Federal Reserve will announce its last interest rate decision of the year, with officials likely to decide on a third consecutive rate cut while suggesting that next year's rate cuts may be lower than previously expected.

It has proven that the resilience of the USA economy is stronger than officials had expected a few months ago. Recent data shows that inflation is declining more slowly than they had anticipated, and the labor market is not as weak as they feared.

These circumstances may prompt officials to adjust their wording in the post-meeting policy statement and raise their expectations for the rate path.

Tim Duy, the chief USA economist at SGH Macro Advisors, stated that stronger-than-expected economic data has also raised questions about whether the neutral rate has already increased. This uncertainty may give officials more reason to slow the rate cuts.

He said, "From the Federal Reserve's perspective, it makes sense to slow action when assessing its position in the policy cycle."

The Federal Reserve's interest rate decision and the officials' latest Summary of Economic Projections (SEP) will be released in Washington at 3:00 AM Beijing time on Thursday. Federal Reserve Chairman Powell will hold a press conference 30 minutes later.

Interest Rate Decision

According to the futures contracts, the market generally expects the Federal Reserve to cut the benchmark interest rate by 25 basis points this week. However, this is not a popular decision.

A CNBC survey found that while 93% of respondents expect a rate cut, only 63% believe it is the right move. Former Kansas City Fed President Esther George and former Boston Fed President Eric Rosengren have also recently expressed their inclination to oppose a rate cut at this meeting.

Bloomberg's chief economist in the USA, Anna Wong, stated, "The Federal Reserve staff can now make highly accurate estimates based on CPI and PPI data, and the core PCE for November, to be released on December 20, is expected to show weakness, which may have reluctantly convinced a few Fed officials concerned about the upside risk of inflation to accept another rate cut."

This move would bring the federal funds rate to a target range of 4.25% to 4.5%, a full percentage point lower than when the rate cuts began in September.

Nevertheless, this benchmark interest rate is still far above the median forecast by officials in September, when they estimated a long-term neutral rate of 2.9%. Recent comments from policymakers indicate that they will raise their estimate of this rate in the new forecasts.

Economic Forecast

Data released in recent months has shown that the economy is performing better than officials expected when they met in September. This means that policymakers may raise their expectations for the economic outlook in the latest forecasts, including higher inflation, lower unemployment, and stronger economic growth.

The most closely watched part of the updated forecasts will be the "dot plot," which shows the expected path of interest rates. According to most economists surveyed by Bloomberg News, the Federal Reserve is expected to cut rates three times next year, one fewer than the prediction made in September.

In contrast, the market's expectations for interest rate cuts by the Federal Reserve are more hawkish. According to the CME's FedWatch, the market anticipates that the Federal Reserve will only lower rates twice in 2025 after this week.

However, any predictions are unlikely to fully account for the potential policy impacts of the elected president of the USA, Trump. Several Federal Reserve officials have stated that they are waiting for more details regarding Trump's tariff and immigration policies before incorporating these policies into their forecasts for growth and inflation.

Policy statement

Federal Reserve officials may choose to carry over the wording from November in their statement, indicating that the risks of achieving the Federal Reserve's employment and inflation goals are 'roughly balanced.'

However, economists from Barclays have stated that policymakers may also enhance the wording to indicate their expectation of 'gradually' lowering interest rates.

Duy indicated that another option is to update the statement, hinting at an openness to pausing interest rate cuts in the near future. He expects the Federal Reserve to maintain stable rates in January after this week's cuts and mentions that officials can convey this message by introducing wording regarding the timing of further rate adjustments.

Press conference

Powell may elaborate at the post-meeting press conference on how officials interpret economic data and what this could mean for the policy outlook.

In terms of the economy, the Federal Reserve Chair may face the following questions: Is progress toward the 2% inflation target stalled, and is the optimism among officials regarding the employment situation stronger than it was in September.

Regarding the policy outlook, he may be asked about the conditions for pausing interest rate cuts and whether such a pause might come as early as January next year. Investors will listen closely for any insights on how officials will set the pace for future rate cuts.

Additionally, Powell will almost certainly be asked how U.S. fiscal policy under Trump will affect monetary policy.

So far, Powell and his colleagues have ignored this issue, citing uncertainty between current rhetoric and future realities. Some economists believe that the incoming president's aggressive tariffs, tax cuts, and large-scale deportation plans could exacerbate inflation further.

The chief economist of the Bank of New York Mellon, and former director of the Fed's monetary affairs department, Vincent Reinhart, stated, "Clearly, the Federal Reserve is in a bind. For officials, unless they are very certain about what political economic changes may occur, they cannot really adjust their forecasts to accommodate those changes."

He added, "At the press conference, people are most concerned about the idea of skipping interest rate cuts. So I think, in this regard, it will be a hawkish pause. (Only) as (Trump's) policies are implemented, the Fed may further update its forecasts."

Gold is leaning towards the downside.

The next direction of the gold price, which has been oscillating for several days, will be influenced by the Federal Reserve's policy statement, economic forecasts, and the wording in Powell's press conference.

Regardless of the Federal Reserve's hawkish interest rate cut expectations orTechnical aspectFrom an analytical perspective, the risk for gold seems to lean towards the downside.

Analyst Dhwani Mehta from the financial website FXStreet points out that the daily chart shows that the gold price has once again fallen below the 21-day moving average, which is $2655. 14 daysRelative Strength Index（RSI) Staying flat but below 50 indicates that the bears may maintain control in the future. The weekly low of $2,633 may provide some support, and if this support is broken, gold prices could test the low of $2,613 from December 6. Below, gold bears will aim for the $2,600 area, which coincides with the 100-day moving average and the low from November 26.

From an upward perspective, the direct resistance level for gold prices is at the 21-day moving average of $2,655. However, gold bulls need to establish themselves above the 50-day moving average in order to launch a meaningful advance towards the $2,700 level, thus moving closer to the several-week high of $2,726.

Is the dot matrix chart the focus of interest rate reduction? Open Futubull > Market > U.S. Stocks >Selected macroeconomic datato capture the latest trends!

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