Australian yields jumped early Thursday in response to a selloff in US bonds, while New Zealand yields were little changed as the country’s economy contracted more than expected in the third quarter and slipped into recession. .
The last time the S&P 500 fell this much on the day of a Fed decision was September 17, 2001, when the index fell nearly 5%. It fell 12% on March 16, 2020, the day after the Federal Reserve’s emergency weekend meeting amid the pandemic.
The Federal Reserve cut interest rates by 25 basis points on Wednesday, as expected, but released quarterly forecasts showing multiple officials expect to cut rates by less than previously expected in 2025. According to the median forecast, the benchmark interest rate is expected to fall to 3.75-4% by the end of next year, equivalent to a cut of two quarter points.
Fed Chairman Jerome Powell said the Fed remains committed to achieving its 2% inflation target and will be more cautious when considering further adjustments to its policy rate. “We need to see how inflation develops,” he said. “We moved quickly to get here, but we’re going to move even more slowly.”
Fed outlook
Max Gochman, senior vice president at Franklin Templeton Investment Solutions, called Mr. Powell “a hawk in pigeon’s clothing.”
“Despite boasting about the strength of the economy and downplaying the recent slowdown in disinflation, the tariffs remain temporary and will not be abolished, and policy must remain restrictive,” he said. Therefore, it is necessary to forecast a two-stage reduction in 2025.” Said.
Whitney Watson of Goldman Sachs Asset Management expects the Fed to hold off on cutting interest rates in January and resume easing in March.
“While the Fed ended the year with a third straight year of rate cuts, the New Year’s resolution is to ease at a slower pace,” said Watson, global co-head of fixed income and liquidity and co-chief investment officer. It seems so.” Solutions in your company.
Elsewhere, the prospect of a U.S. government shutdown resurfaced. President-elect Donald Trump told Fox News that he is “totally opposed” to the proposed government funding bill and threatened to take a stopgap measure to reopen the government through mid-March. If the bill fails, the government could be partially shut down as early as Saturday.
The Fed’s rate cut on Wednesday came ahead of a busy schedule of announcements from central banks around the world. Interest rate decisions are scheduled for Thursday in Japan, the Philippines, Taiwan, the United Kingdom, Norway, Sweden and Mexico. China’s one-year medium-term lending facility interest rate may be announced at any time until Dec. 24.
In the commodity market, oil prices fell as expectations for a smaller Fed interest rate cut pushed up the dollar. Gold fell to a one-month low, and Bitcoin traded at around $100,000.
