The Federal Reserve is expected to announce a 25 basis point (bps) rate cut on December 18, marking the third consecutive reduction this year, bringing the federal funds rate to a range of 4.25%-4.5%. 

However, the focus is on the dot plot for 2025, which may indicate fewer cuts than previously anticipated due to persistent inflation and economic uncertainties. 

This cautious outlook could lead to market volatility, as fewer cuts in 2025 might affect equity valuations and investor sentiment.

How will the revised dot plot impact the stock market? The revised dot plot could significantly impact the stock market by shaping expectations about future monetary policy. If the dot plot signals fewer rate cuts in 2025, it may dampen investor sentiment, leading to a potential decline in equities as borrowing costs remain higher for longer. Conversely, a dovish outlook with more cuts could boost risk-taking and stock prices. Market reactions will also depend on Fed Chair Powell’s commentary, which may clarify the Fed’s stance on inflation and economic growth.

Good growth potential overall! Safe trading all! [Miser]