Federal Reserve Meeting Minutes: Hawkish Rate Cut (December 2024)

Source: Zhi Bao Investment Research

Abstract

At this meeting, the Federal Reserve cut interest rates by 25bp to a range of 4.25% - 4.5%, as expected. The overnight reverse repurchase agreement tool has been technically adjusted to the lower end of the federal fund rate range.
The wording of the meeting statement has been adjusted to reflect changes in the 'pace' and 'extent' of the FOMC's consideration of future policies. There were also differences in voting, with some members opposing a rate cut in December.
Economic forecasts clearly reflect concerns about inflation risks, and the Fed's risk balance has clearly shifted towards inflation again. The dot plot only implies two interest rate cuts next year, showing an absolute hawkish bias. *During the opening remarks of the press conference, Powell mentioned a "more neutral setting" and a "cautious" approach to further rate cuts, showing a hawkish stance.
The US dollar/VIX soared, while US bonds, stocks, gold, and bitcoin plummeted.

Declaration (bold indicates changes)

Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.

Recent indicators indicate that economic activity continues to expand at a steady pace. Since the beginning of this year, the labor market conditions have generally eased, with an increase in the unemployment rate, but it remains at a low level. The inflation rate has moved closer to the committee's target of 2%, but it remains slightly higher.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

The committee strives to achieve full employment and a 2% inflation target over the medium term. The committee assesses that the risks to achieving the employment and inflation objectives are roughly balanced. The economic outlook is uncertain, and the committee is monitoring the dual risks to its dual mandate.

In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

To support its goals, the Committee has decided to lower the target range for the federal funds rate by 25 basis points to 4.25% to 4.5%. In considering the magnitude and timing of further adjustments to the target range for the federal funds rate, the Committee will carefully assess new data received, changing outlooks, and balance of risks. The Committee will continue to reduce holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee is firmly committed to supporting maximum employment and returning the inflation rate to the target of 2%.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the impact of incoming information on the economic outlook. If risks emerge that could impede the Committee's objectives, the Committee is prepared to adjust the stance of monetary policy as appropriate. The Committee's assessment will take into account a wide range of information, including readings on labor market conditions, inflation pressures and expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against the action was Beth M. Hammack, who preferred to maintain the target range for the federal funds rate at 4-1/2 to 4-3/4 percent.

Voting in favor of the monetary policy action are: Chairman Jerome Powell, Vice Chairman John Williams, Thomas Barkin, Michael Barr, Raphael Bostic, Michelle Bowman, Lisa Cook, Mary Daly, Philip Jefferson, Adrienne Kocer and Christopher Waller. Beth M. Hammack voted against, preferring to keep the federal funds rate target range at 4.5% to 4.75%.

Economic Forecasting and Dot Plot

Raise the economic forecast for 24/25, lower the unemployment rate forecast, raise the inflation forecast, and the inflation forecast for 25 sees a significant increase.

The dot plot only indicates two interest rate cuts** next year, showing a strong hawkish bias.**