FOMC Preview: How Hard Will Powell Push Back On The Record Easing In Financial Conditions

And so we have reached the last big economic event of 2023, the December FOMC meeting, where market focus will turn away from the actual announcement - as the Fed is certain to keep rates unchanged at 5.25-5.50% - and to the accompanying Statement of Economic Projections (SEPs) and Dot Plot to gauge the magnitude of forecast cuts in store for 2024 and beyond, especially since the market priced in a record 90bps of easing in November, and another 10bps in December, or a total of 4 rate cuts, which is double what the Fed projects for all of 2024.

As such the big question is just how much will Powell push back on the unprecedented easing in financial conditions in the past 6 weeks (i.e., the surge in stocks and the plunge in yields), and will the Fed Chair break the market just to prove that the Fed will be right and the spirit of the Arthur Burns Fed remains dead (see "For The Market To Be Right, Every Member Of The FOMC Has To Be Wrong")