Key Takeaways from the Fed Meeting – Voting Will Reveal Divergence, Powell May Raise the Threshold for Rate Cuts

The key takeaways from the Federal Reserve meeting on December 11 are as follows:

Policy Statement

1. Barclays: The statement is expected to include hawkish language, suggesting a pause in rate cuts in January.

2. JPMorgan Chase: The wording of the statement may be adjusted to "focus on the magnitude and timing of further adjustments," which would be a subtle change, suggesting a reduced likelihood of interest rate cuts at subsequent meetings.

3. Wells Fargo: The statement is expected to signal a further increase in the threshold for rate cuts and suggest that "keeping rates unchanged" is the current assumption of most committee members.

Voting Disagreements

1. BNY Mellon: The dot plot is likely to confirm the recent divergence in policy stances within the FOMC, with committee members expected to show significant differences in their views on the policy direction for 2026.

2. JPMorgan Chase: The meeting is expected to see at least two dissenting votes against a rate cut, advocating for holding rates steady, and one dissenting vote demanding a larger rate cut. The dot plot is expected to show one more rate cut in each of the next two years.

3. FP Markets: This meeting may see hawkish dissenters, such as Schmid, Goolsby, Musalaim, and Powell. If rates are cut this week, another cut is expected next year.

Powell's statement

1. Bank of America: Powell may avoid giving explicit hawkish guidance; his communication strategy may revolve around real interest rates or data dependence.

2. Danske Bank: Powell is expected to maintain the stance of the October meeting and clearly express his opposition to market expectations of consecutive rate cuts.

3. Deutsche Bank: Powell is expected to emphasize that the threshold for further rate cuts in early 2026 is very high, signaling a short-term pause in rate cuts.

4. Former Federal Reserve Vice Chairman Blinder: Powell is expected to explain the rate cut in a similar manner to the last press conference, warning the market not to assume that the Fed will continue to cut rates.

5. Morgan Stanley: Powell is expected to hint that the monetary policy adjustment phase is over, and any subsequent actions will be based on assessments at each meeting and the latest data.

other

1. Bank of America: The Federal Reserve is expected to announce a “reserve management operation” that will begin in January to purchase Treasury bills with maturities of one year or less at a rate of $45 billion per month.

2. Wells Fargo: It is not expected that a decision on "reserve management operations" will be made at this meeting; instead, it is inclined to announce the launch of the plan at the March meeting. (Jinshi)