[FOMC Preview] Stayed unchanged 3 times in a row! Does the Fed suggest that interest rate cuts are off schedule?

The US Federal Reserve (Fed) is scheduled to announce the last policy interest rate decision of the year at the Federal Open Market Committee (FOMC) at 12/14 4:00 a.m. Japan time. Along with policy decisions, the Fed will also announce the latest “Economic Forecast Outline (SEP).” This summary includes “dot plots” showing future interest rate forecasts predicted by policy makers. In addition, forecasts for the inflation rate, GDP growth rate, and unemployment rate will also be announced.

According to Fedwatch, which is based on FF interest rate futures, the marketOver 98% probabilityPolicy interest rates withLeave it at 5.25-5.50%I'm predicting that. Since the consensus is that policy interest rates remain unchanged, market interestMonetary policy after 2024 (timing and pace of interest rate cuts, etc.)It has moved on to.

Last time, according to the forecast as of September, if the fluctuation range of policy interest rates was 0.25% per transaction, it was calculated that an additional interest rate increase would be carried out once within the year, and interest rates would be cut twice a year next year.Also pay attention to what kind of changes there are in the current outlookIt's been done. In the market, interest rate cuts of about 4 to 5 times in 2024 have already been factored in, and long-term interest rates in the US have also dropped to 4.2%. If the Fed does not show a forecast of interest rate cuts as expected by the market, long-term US interest rates will rise, and there is a possibility that the stock market will also fall.

Since the FOMC in November, US economic data compared to the strong trend in the third quarter,It's slowing down, but overall it's still solid。 The US personal consumption expenditure (PCE) core price index for October, which the US financial authorities place importance on as an inflation indicator, rose 3.5% from the previous year, and growth slowed. The number of people employed in the non-farm sector in November exceeded market expectations of 180,000, and increased by 199,000. The unemployment rate fell below expectations of 3.9% and fell to 3.7%. November US employment statistics that are higher than expectedShow the solidity of the labor market、Observation of interest rate cuts early next year is “premature”It also suggests that this is the case, and Fed Chairman Powell talks about interest rate forecasts for 24The possibility of showing dovish views has declined slightlyI did it.

The US consumer price index (CPI) for November was almostThe content is as expected by the marketThen,Inflation continues to slowIt was accepted. The content of the core index, which excludes energy and food, is also generally as expected. However, although the core index was as expected, the month-on-month growth rose 0.3% from the previous time, and service inflation excluding housing expenses, which is said to be concerned by Fed Chairman Powell, the so-called supercore, rose 0.4% from the previous month in calculated values from 0.2% last time.Although overall inflation is settling down, it looks like the strength of core inflation has been shown。

If the pace of slowing inflation slows down, it will be difficult to convert interest rate cuts at an early stage that the market anticipates. According to CME's FedWatch tool, as of the 12th, the probability of a March interest rate cut is 46.53%, and the probability of a May interest rate cut is close to 79.02%.

Dot plot of Nomura Securities3 interest rate cuts in 2024It is expected to suggest it. According to Aichi Amemiya, an analyst at Nomura Securities, the median interest rate cut forecast for 20244.625%It will drop to next year3 25bp interest rate cutsIt is said that it is equivalent to. This is if the Fed were earlyConsidering interest rate cuts in the first half of 2024It means doing it.

Nomura is alsoInflation forecasts are expected to drop drastically in the Economic Forecast Summary (SEP) for December。 According to the September SEP, the median core PCE forecast for 20233.7%it was. It seemed to be at a high level at the time, but there is a high possibility that it will be pushed down to 3.4% due to subsequent downside surprises. Meanwhile, Nomura has core inflation2.4%It has declined to, and it is expected that this trend will continue until 2024.

Chairman Powell will give a speech on the 1st, and the market will factor inThe early transition to interest rate cuts is “too early to discuss”They fought back. “If you decide it's appropriate, even moreReady to tighten monetary policy” and repeated the statement as before. They also said that “it is too early to conclude with confidence that a sufficiently tightening stance has been achieved,” and they did not lose their attitude of judging future policy decisions depending on data.

However, the US WSJ FED watcher, reporter Nick Timiraos, wrote the latest article,It is unlikely that senior Fed officials will discuss the timing of interest rate cuts in earnest this week, and unless the economy decelerates more than expected, they will not discuss the next few monthsIt says it probably is.

JPMorgan's chief economist Michael Feroli also believes that Chairman Powell will not speak about interest rate cuts. “At the press conference, Chairman Powell said what the Fed Committee is currently consideringAre interest rates unchanged or tightenedIt's just that,Avoid talking about when interest rates will be cutI'll do that,” Feroli said.

Michael Pearce, chief economist at Oxford Economics, said on WednesdayThe press conference is slightly hawkish, Mr. Powell and the FedIt shows an attitude of prolonging high US interest ratesI'm looking at it. “The latest economic forecasts and the press conference after the meeting will reverse the interest rate cut observations from early next year and emphasize that the inflation rate is still too strong,” Pearce said.

Analysts at Nomura Securities emphasized options at Federal Reserve Chairman Powell's press conference and predicted that discussions on the timing of interest rate cuts and their standard values would be avoided.