"Speculation Mounts on Early Fed Rate Cuts"

Investors are increasingly hopeful about potential interest rate cuts by the Federal Reserve in the first half of the upcoming year, despite officials, including Chairman Jerome Powell, maintaining that rate cuts are not currently on the table. Some analysts suggest a possible rate cut as early as the first quarter.

Recent inflation figures and real-time forecasts indicate a noticeable economic slowdown since summer, deviating from the robust growth seen in the third quarter.

Futures contracts reflect a growing belief in a rate cut within the next few months, with a 44% chance of the first cut occurring in March.

If these predictions hold true, the impact on the Fed's longer-term strategy of raising interest rates could be significant, according to economists like Diane Swonk from KPMG.

The Fed's two-day policy meeting this week is expected to conclude with the central bank maintaining the highest interest rates in 22 years for the third consecutive meeting. Officials will also release updated economic projections, likely indicating a faster-than-expected cooling of inflation.

Despite some officials, including Powell, suggesting it's too early for rate hikes, investors believe the Fed's commitment to data-dependency may lead to early rate cuts. Powell's recent comments in Atlanta, stating no plans for rate hikes, resulted in a stock market surge as it echoed his dovish stance.
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