#FOMCWatch
FOMC Watch: December is still far from a definitive conclusion – ABN AMRO
The FOMC lowered the policy interest rate by 25 basis points (bp) to a range of 3.75-4.00%. There were two differing votes, with Miran supporting a half-point cut and Schmid supporting no cut. Schmid's vote came as a surprise and likely reflects broader disagreement and uncertainty ahead. Powell explicitly confirmed this, highlighting substantial differences of opinion and noting that December is 'far from' a definitive conclusion. Additionally, the monetary policy statement maintains the description of the labor market, noting that the latest indicators are consistent with previous developments. Powell's rationale for today's cut is therefore identical to last time; risks on both sides of the mandate have become more balanced and the policy interest rate has been moved closer to neutral, reported ABN AMRO Senior Economist Rogier Quaedvlieg.
The labor market is gradually cooling, with no major shifts in prospects
"We are observing two things. Details about the potential end of QT, and any shifts in Fed prospects without government data. Regarding the first, the Fed did announce the end of QT, and that they will stop shrinking the balance sheet starting December 1. They will roll over maturing agency debt into Treasury securities. Reserves have fallen to 'adequate liquidity' levels in recent months. The size of the balance sheet will be frozen at that level, but will be allowed to grow later to maintain adequate liquidity as non-reserve growth occurs."
"Regarding prospects, Powell's assessment is that the available data shows little change in the outlook. The labor market still appears to be gradually cooling, and in a low hiring mode, with low layoffs. The latest CPI report confirms that high goods inflation is due to tariffs, while housing services are gradually cooling,