The Fed’s decision to hold rates steady in December
was in line with expectations. On the back of declining
inflation, the Dot Plot indicated that the Fed expects to
“pivot” to interest rate cuts in 2024, with a reduction of
0.75% by the end of the year.
The market was already expecting double that, with
1.5% of cuts priced in by the end of 2024. Following the
“pivot,” yields continued to fall, and equity markets
rallied on the hope of more accommodative monetary
policy and a soft landing.
At the end of December, the Bloomberg Financial
Conditions Index indicated that financial conditions
were the loosest they had been in over two years.