Recapping the Fed flip-flop of 2024

Over one year it felt like we’ve been through five different versions of the Fed

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I sit reflecting on the year and what has transpired, especially in relation to the recent FOMC meeting that surprised hawkish and shocked markets. Over one year it felt like we’ve been through five different versions of the Fed. 

In the winter of 2024, the Fed got spooked by surprisingly elevated inflation prints in the first quarter. This led them to reverse their dovish inclinations they had set up in the fall of 2023. Then, in June, the FOMC surprised the market with a hawkish dot plot that implied hardly any cuts in 2024. 

Then, a concerning jobs report in August flipped the entire narrative on its head. The Fed became concerned about a growth scare and losing the labor market, and once again flipped dovish, climaxing in a September cut of 50bps to kick off the rate-cutting cycle. We’ve now had 100bps of cuts and the Fed has once again flipped hawkish. The outlook for 2025 is uncertain, with a forecast of only two cuts occurring next year. 

If that all sounded like a rollercoaster of confusion, trust your instinct — it was.

Now, with January priced for a pause and no meeting in February, I’m once again expecting another flip-flop as we head into the new year. Additionally, I see the potential for more cuts than what is currently expected in 2025 to be priced in during the first quarter.

So as we head into the new year, I give you my parting thoughts: Expect to continue hearing the noise of flip-flops in the distance. 

Enjoy the holidays and see you in 2025!


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