December Rate Cut Gains Momentum: Powell’s Stanford Speech & FOMC Shift – US Economy & Bitcoin Impact

[속보] 미국 12월 금리인하 급물살 “제롬파월 스탠포드 연설” …뉴욕증시 비트코인 ” FOMC 케빈 해싯 효과”

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The Federal Reserve is increasingly leaning towards a potential interest rate cut in December, fueled by recent comments from key officials. Market expectations for a rate reduction have surged following remarks made by Federal Reserve Chair Jerome Powell, signaling a shift in focus towards employment data over inflation. This shift is already impacting markets, with gains observed in New York stock markets and cryptocurrencies like Bitcoin, Ethereum, Ripple, Solana, and others.

Investors are closely watching upcoming economic data, including the Producer Price Index (PPI) and Consumer Price Index (CPI) reports, for further clues about the Fed’s trajectory. The release of the CPI report may be cancelled. The potential for a rate cut comes ahead of the Federal Open Market Committee’s (FOMC) final meeting of the year, scheduled for December 9-10.

Recent statements from Fed officials have highlighted diverging views on further monetary policy adjustments, contributing to market volatility. While the outcome of the December meeting remains uncertain – whether a cut or a hold – analysts anticipate at least three members of the FOMC may voice dissenting opinions. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of a rate cut at the December FOMC meeting has jumped to 71%, with a 29% chance of the rate remaining unchanged. This represents a significant increase from the previous day, when the release of minutes from the October FOMC meeting – revealing resistance to further cuts from several committee members – put the probability of a December cut at around 30%. The shift followed comments from New York Federal Reserve President John Williams, who stated, “There is still room for further adjustment in the near term.”

Adding to the dovish sentiment, Mary Daly, President of the San Francisco Federal Reserve, expressed concerns about a weakening labor market and indicated support for a December rate cut, according to a November 24 report in the Wall Street Journal. “When I look at the labor market, I’m not confident that we’re going to get there,” Daly said in the interview. “The labor market is currently fragile enough that it could experience a non-linear change [a sudden deterioration].” Daly noted that, compared to the labor market, inflation risks appeared lower, particularly considering the mitigation of cost increases related to the Trump administration’s tariff policies. Daly will not have a vote on the FOMC in 2024 or 2025.

The debate within the FOMC has become particularly pronounced leading up to the December 9-10 meeting. Just a week ago, expectations favored a rate hold, but those shifted after President Williams signaled his support for a potential December rate cut, stating, “There is still room for a further adjustment in the near term.” This has fueled speculation that the Fed may be preparing to ease monetary policy. The decision highlights ongoing market volatility as investors attempt to gauge the central bank’s next move.

The momentum towards a potential rate cut was further bolstered by comments from Williams, a close ally of Chair Powell. His remarks are being interpreted as a strong signal of Powell’s policy direction. According to a recent compilation of public statements by FOMC members published by the Wall Street Journal, the committee is currently divided with 9 members favoring a hold, 6 supporting a cut, and 4 with unclear positions. Within the voting members – a total of 12 – the split is 5 favoring a hold, 4 supporting a cut, and 3 with unclear positions.

While the Fed’s decisions are led by the Chair, they require approval from the seven governors appointed by the President, the President of the New York Fed, and four other regional Fed presidents who rotate voting rights. The public debate has led economic experts and market participants to believe that a lack of sufficient support for a cut could result in a hold at the December meeting. However, the probability of a cut has increased significantly in recent days.

A key factor driving expectations for a December rate cut was Williams’s statement on November 21. He indicated that bringing the benchmark interest rate down to a neutral level – one that neither stimulates nor hinders growth – could still allow for “a further adjustment in the near term.”

Adding to the pressure, Steven Mnuchin, a close associate of former President Trump, suggested he would support a 0.25% rate cut rather than oppose a larger reduction, stating in a Bloomberg TV interview that his vote would be “the marginal vote.”

Concerns are growing about a widening gap in consumer spending between income brackets in the United States, raising fears of a K-shaped economy. The term gained prominence in 2020 to describe the divergent economic experiences of wealthy and low-income Americans following the COVID-19 pandemic. Bloomberg reports that economists are concerned the U.S. economy is becoming increasingly unbalanced as spending concentrates among high-income earners. The report underscores investors’ focus on inflation data and the potential for economic slowdown.

“Consumer spending in the U.S. is more concentrated among the top 10% than ever before,” Bloomberg noted, accounting for roughly half of all consumer spending. The top 20% account for nearly two-thirds of total consumer spending, while the remaining 80% now account for 37% of spending, down from about 42% before the pandemic. Those benefiting from rising stock and housing prices continue to spend, while lower-income households are curbing their spending due to inflation and a weakening job market.

Economists are concerned that even a moderate correction in the stock market could quickly curtail spending by the top 20%.

In New York City, self-described “democratic socialist” Joran Momandani won a mayoral election by focusing on issues of housing and childcare costs.

Kim Dae-ho, Global Economic Research Institute
tiger8280@g-enews.com