Bonds & Stocks
Wall Street is gearing up for what’s expected to be the most-important Federal Reserve meeting of the year, with traders awaiting any indications on whether the market’s aggressive dovish bid is now overdone. Stock futures, bonds and the dollar saw mild moves amid bets the Fed will hold rates Wednesday and try to put a lid on expectations for rate cuts of over 100 basis points in the next 12 months. How the Fed frames its outlook for policy ending next year and 2025 via its “dot plot” could inject some uncertainty into the market, given that it has run well ahead of the central bank’s latest forecasts.
Economy
The FOMC is widely expected to hold rates steady for a third consecutive time at the Dec. 12-13 meeting. Two straight holds could be seen as a temporary pause, but we think three constitute an end to the cycle. Officials will deliberate the conditions under which they could start cutting rates next year. At the same time, at the news conference Fed Chair Jerome Powell will likely push back against the idea that rates cuts are right around the corner.
World
Chinese President Xi Jinping wrapped his first visit to Vietnam in six years by calling on the Southeast Asian country to stop external forces from causing problems in the Asia-Pacific. “Both sides should be alert to and oppose any attempts to mess up Asia-Pacific,” Xi said on Wednesday, in comments likely to be seen as a veiled reference to the US.