Fed to deliver hawkish tone next week – Likely to upwardly revise 'dot plot'

Matthew Ryan, CFA Ebury

A beat in the November producer inflation data added to expectations that the Federal Reserve would take a slow and steady approach to US rate cuts in 2025.

Earlier in the week, the latest CPI report showed a mild uptick in inflation last month (to 2.7% from 2.6%), but this merely matched estimates and failed to rock the boat too much.

All signs are now pointing to another cut from the Fed at its final meeting of the year next week, but we expect the communications to be hawkish.

This is likely to entail an upward revision to the FOMC’s ‘dot plot’, indicating that committee members expect a shallower pace of cuts in 2025 than had been previously expected.

There’s no tier-1 economic news out of the US today, so expect the dollar to be driven by expectations for next week’s Fed announcement.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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