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Fed Watch – A hawkish cut, with sharp talons
The Fed cut policy rates by 25 bps in another non-unanimous decision, with Hammack dissenting in favour of no cut. The cut was contrasted by a significant tightening in the dot plot, which showed a median 50 basis points of easing in 2025, compared to 100 basis points of easing in 2025 in the September dot plot. This outlook is consistent with an upward revision in the Summary of Economic Projections, with the PCE inflation forecast for 2025 rising to 2.5 from 2.1 in September. In a remarkable change of message, Powell noted that some of the projections did make assumptions on future fiscal policy. However, others did not, and some did not disclose, which is explains both the uptick in the level and the uncertainty in the inflation forecast.
FOMC Preview – Easing between a rock and a hard place
We expect a 25 bps rate cut with no major surprises from the Fed this Wednesday. Since the start of easing, inflation has picked up, and the labour market remains a mixed bag. This puts the Fed in a difficult position, though the likely response is to keep moving towards neutral.
The Week Ahead - 16 - 20 December 2024
These are the Key Macro Events for the upcoming week.
Economic Outlook 2025 - Webinar - The year of the tariff
Video of ABN AMRO's Group Economics webinar on the economic outlook for 2025.
The week ahead - 9 - 13 December 2024
These are the Key Macro Events for the upcoming week.
Global manufacturing shows further improvement
Global manufacturing PMI rises back to ‘neutral’. EM outperformance continues, Demand picks up (also driven by EMs), and global excess supply continues. Subcomponents for input and output prices up, but remain far below 2021/22 peaks.
The week ahead - 2 - 6 December 2024
These are the Key Macro Events for the upcoming week.
US Watch – Trade Wars Episode I: The phantom tariff
• President Elect Trump proposed a 25% tariff on Mexico and Canada to halt migrant and drug flows. China would get 10% because they do not do enough to halt export of raw materials for drug production. The tariff is milder than the universal tariff campaign proposal, but there is no reason it would replace it. The tariffs would hit Mexico and Canada hard.
US - A bull entered the China shop
The US economy showed remarkable resilience in the face of very restrictive rates. It is however increasingly showing cracks, with weakening consumption and labour market. Uncertainty about future policy is large, as is the range of potential outcomes.
Global Outlook 2025 - The year of the tariff
The return of president Trump is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit, leading to a sharp slowdown later in the year. Tariffs threaten the nascent recoveries in domestic demand in the eurozone and China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below the 2% target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate falling to 1%. This will push the euro to parity vs the dollar in the course of 2025.