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Will Today’s PPI Push Fed to Match SNB’s Bold Rate Cut After ECB Takes Its Turn?
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Key Points:
- Fed faces triple data influence: PPI report, CPI's 2.7% annual rate, and surprise global rate cuts ahead of crucial December meeting.
- Swiss National Bank's unexpected 50-basis-point cut signals growing economic concerns among global central bankers.
- Markets show overwhelming confidence with 99% probability of Fed rate cut, while ECB maintains measured approach.
- Global monetary easing gains momentum as ECB prepares fourth cut of 2024 amid weak eurozone manufacturing data.
- Fed expected to pause in January after December cut to assess impact, with uncertainty looming over 2025 policy path.
Global Rate Cuts Build Momentum for Fed’s Final 2024 Move
Today’s Producer Price Index (PPI) data will provide the Federal Reserve with its final major inflation reading before next week’s crucial interest rate decision. With November’s Consumer Price Index showing a 2.7% annual rate and core inflation at 3.3%, the PPI figures – expected to show a modest 0.2% monthly increase – could reinforce the growing consensus for a rate cut.
Markets Bet Big on December Cut
Markets have already priced in a 99% probability of a quarter-point reduction at the December Federal Open Market Committee meeting, according to CME FedWatch data. This confidence stems from the ongoing moderation in inflation metrics and signs that previous rate hikes have successfully cooled the economy without triggering a hard landing.
Goldman Sachs Asset Management’s Whitney Watson notes that the recent CPI data has “cleared the way” for a rate cut, suggesting the Fed remains “confident in the disinflation process.” Today’s PPI reading, if in line with expectations, would provide additional support for this view, offering evidence that pricing pressures continue to ease throughout the supply chain.
Swiss Surprise Sets the Tone
The global context may also influence the Fed’s deliberations. Today’s surprise 50-basis-point cut by the Swiss National Bank – double the expected reduction – signals growing concern about economic growth among central bankers. Switzerland’s move to combat both low inflation and currency strength demonstrates the complex balancing act facing monetary policymakers.
The European Central Bank’s anticipated 25-basis-point cut today, its fourth this year, further illustrates the broader shift toward monetary easing among major economies. However, the Fed has demonstrated its willingness to chart an independent course, as shown by its unexpected 50-basis-point cut in September while the ECB maintained a more measured approach.
Domestic Data Takes Center Stage
While international monetary policy shifts provide important context, the Fed’s decision will primarily hinge on domestic data. The combination of yesterday’s CPI report, today’s PPI figures, and recent labor market indicators will shape next week’s outcome. The Fed’s current blackout period means officials cannot comment on these developments, leaving markets to interpret the data without additional guidance.
The Path Forward
Looking ahead, analysts will closely watch the Fed’s forward guidance. The central bank is expected to skip a January cut to assess the impact of previous easing measures, but the pace of future reductions remains uncertain. The interplay between inflation readings, economic growth indicators, and global monetary conditions will determine whether the Fed maintains its gradual approach or accelerates its easing cycle in 2025.
Today’s data releases and central bank decisions mark the culmination of a pivotal week for monetary policy, setting the stage for what could be the Fed’s most significant meeting of 2024.
More Information in our Economic Calendar.
About the Author
James Hyerczykauthor
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.
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