Expectation for Fed Interest Rate Cut: 96% Probability of a 25 Basis Point Cut Today

The Federal Reserve will hold its final meeting of 2024 today. It is expected that the Federal Reserve will make some important announcements after the meeting. There is a high possibility that it will announce a 25 basis points interest rate cut. The Fed is Expected to Cut Interest Rates Again According to Kalshi, there is at least a 96% chance that the Federal Reserve will announce a 25 basis point interest rate cut today.

This year, the Federal Reserve has implemented at least two interest rate cuts. Once the new interest rate cut is implemented, the total interest rate cuts for 2024 will reach 100 basis points. US Inflation Index Rises Again Inflation pressure has increased significantly in the past few months. This has added complexity to the efforts to stabilize the economy of the Federal Reserve. At the beginning of this year, the US CPI index was as low as 308.417 points. In April, this index rose to 313.55 points. In October, this index reached the peak of the year at 315.66 points. However, in November, this index slightly decreased to 315.49 points.

In January 2024, the US producer price index was 142.683 points. In June, this index reached 144.834 points. Since June, this index has been steadily growing. In November, this index reached its peak for the year at 146.493 points.

At the beginning of the year, the US personal consumption expenditure index was around 122.115 points. In April, this index reached a peak of 123.234 points. Since June, this index has been steadily increasing. In September, this index was at 123.931 points. In October, this index rose to a monthly peak of 124.266 points.

Challenges of the US Labor Market The deteriorating job market situation in the United States is primarily prompting policymakers to consider interest rate cuts. Although the job market initially witnessed some certain improvements, it has recently started to weaken. The initial US initial jobless claims index was 224,000 on November 30. In the first week of December, this index recovered to 242,000 - the lowest level in at least 8 weeks.

On November 23, the US Continuing Claims for Unemployment Insurance Index was 1.87 thousand. On November 30, this index surged to 1.89 thousand.

Expectations for 2025 The key is to understand the prospects for the US Federal Reserve for 2025. The US will see a new government take office at the White House at the end of January next year. Data shows the main challenge for the upcoming government will be balancing inflation control with economic growth.

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