Decision on Base Rate at 2 PM
Key Focus on 'Dot Plot' Showing Next Year's Rate Outlook
Number of Rate Cuts Next Year Likely Reduced from 4 to 2-3
Powell's Press Conference at 2:30 PM in Spotlight
The three major indices of the U.S. New York stock market showed mixed trends in early trading on the 18th (local time). Investors are cautiously watching the market while awaiting the Federal Reserve's (Fed) interest rate decision scheduled for the afternoon.
As of 9:36 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) was up 0.21% from the previous trading day, standing at 43,542.37. After falling for nine consecutive trading days?the longest losing streak since 1978?the Dow managed to rebound in early trading. The large-cap S&P 500 index was down 0.12% at 6,043.37, and the tech-heavy Nasdaq index was trading 0.28% lower at 20,053.4.
Investors’ attention is focused on the Federal Open Market Committee (FOMC) rate decision scheduled for 2 p.m. this afternoon, the last of the year. The market is confident that the Fed will cut interest rates. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market currently prices in a 98.8% probability that the Fed will lower rates by 0.25 percentage points at this month’s FOMC meeting. The chance of a rate hold is only 1.2%.
The key points to watch are the Fed’s dot plot and the Summary of Economic Projections (SEP). There is growing speculation that the Fed will raise its inflation forecast for next year in the SEP and lower the expected number of rate cuts in the dot plot. In September, the Fed’s dot plot forecasted four rate cuts (100 basis points; 1bp = 0.01 percentage points) in 2025. However, with inflation easing slowing and the labor market remaining robust, Wall Street expects the Fed to signal fewer than three rate cuts next year. Concerns about "Trumflation" (inflation caused by Trump’s policies) are also cited as a factor that could lead the Fed to lower its rate cut projections.
Ross Mayfield, investment strategist at Baird, said, "I think the Fed will cut rates, but Jerome Powell’s language and tone are likely to remain hawkish (favoring monetary tightening), as we have seen recently. Because much is uncertain, they will be somewhat hesitant to promise more than four rate cuts in 2025."
Pauloran Wabont, economist at Ecopai Investments, analyzed, "This decision will be less consensus-based than the market expects. I think this marks the end of consecutive rate cuts." He emphasized, "The biggest question is how Chairman Powell will communicate this to the market."
Thirty minutes after the Fed’s rate decision, at 2:30 p.m., Chairman Powell’s press conference is scheduled. Investors are expected to gain clearer insights into next year’s rate path from Powell’s message.
This week will also see the release of key economic indicators that provide insight into the U.S. economy. On the 19th, the final Q3 Gross Domestic Product (GDP) growth rate will be announced, and on the 20th, the November Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, will be released.
By individual stocks, AI leader Nvidia is up 2.83%. Semiconductor company Broadcom is down 2.53%. Electric vehicle maker Tesla, which hit a new all-time high the previous day, is down 3.47%.
U.S. Treasury yields are steady. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 1 basis point to 4.39% from the previous trading day, while the 2-year Treasury yield, sensitive to monetary policy, remained at 4.22%.
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