The December Fed Meeting: What to Watch

The December Fed meeting is today! Despite the worrying lack of data, the market is confident that rates will be cut by 25 bps, with the FedWatch tool giving a 87.6% chance for a cut.

With PCE inflation at expectations and no surprises from JOLTS, all indicators are pointing to a cut. But there's more that meets than eye to this situation.

This is Jerome Powell's last meeting as Fed Chair, with his successor already decided, though not announced. Wall Street is speculating that Kevin Hassett, current director of the National Economic Council, will replace Powell. He is qualified, which is more than can be said for some of Trump's other appointments, but he is also a MAGA loyalist, which may present issues for the Fed's neutrality going forward.

While a cut is expected, close attention should be paid towards Powell's rhetoric during his remarks and responses to Q&A after the meeting, as they will signal what the rest of the FOMC is thinking about the economy. This could be the last meeting before those carefully chosen words are replaced by partisan rhetoric.

I'll close this post out with a commendation of Jerome Powell. He fearlessly commanded the Fed through the COVID crisis, the subsequent inflation, and immense pressure from the White House, never wavering in his resolve. The Fed is worse off without him at the helm.

What do you think? Will the Fed cut rates?