Global awaits interest rate policies in the new year!

• Markets are awaiting the last meeting of the US Federal Reserve for 2024, which is expected to witness the third consecutive rate cut.
• Also, markets are awaiting the Fed's expectations for interest rates for the coming periods.
• The statements of the US Federal Reserve Chairman will be closely monitored, especially those that may be taken in light of the expected fiscal policies of US President-elect Donald Trump.

Introduction: 

The Federal Reserve members conclude their meetings for this year today, Wednesday, December 18, 2024, at 10:00 PM Jordan time, to determine new interest rate levels, with great expectations of taking a new step towards continuing a third consecutive reduction in interest rates to record 4.5% in a step that supports the current Federal Reserve vision, which shows the continued expansion of economic activity and that the labor market is showing flexibility and positivity, and that inflation is heading towards the target levels of 2%.

The Federal Reserve recognizes this trend, at least within the current short and medium terms, but it is still uncertain about the path of future economic data, especially with the new President Trump starting his term as President of the United States.

Therefore, the press conference following the announcement of interest rates will gain great importance to know what the Federal Reserve's vision is for future interest rates and the economy in general.

In general, the direction of the US dollar, which is currently stable near the 107 levels, will be determined by the extent to which Trump’s economic promises, which include tax cuts, increased spending, and tariffs, are implemented and their impact on growth, inflation, and borrowing costs, so we expect more difficult upcoming meetings and the US dollar will remain alert to see which new policies will be implemented first.

Jerome Powell had previously stated that the outcome of the presidential election does not have a “short-term” impact on the central bank’s policy, but it may play a fundamental role in the long term. He indicated that it may be “appropriate” to slow the pace of interest rate cuts “at some point,” adding that policymakers are not on a predetermined path, and we are not on any predetermined path, and we will continue to make our decisions, meeting by meeting. He added: “If the economy remains strong and inflation does not move sustainably toward 2%, we can adjust policy more slowly, but if the labor market weakens unexpectedly, or inflation declines faster than expected, we can move more quickly.”

What we expect regarding the Fed Chairman's press conference and its impact on market movement is as follows:

• The Fed Chairman will leave the door open to all expected possibilities, especially since inflation has shown an increase in the last two readings, despite assurances that the recent declines to 2.7% are satisfactory to the Fed.
• Using terms that indicate the absence of a specific path for interest rates may be positive for the dollar and negative for stocks, metals and other currencies, but the presence of hints and plans for further reductions next year may be negative for the US dollar and positive for stocks and metals.
• We expect significant fluctuations in price movement between rises and falls, and it will take some time before they begin to stabilize again and take a specific path.

Therefore, it is necessary to note and remember the golden rule: Markets have different ideas and convictions in the way they interpret the issued information, and therefore prices cannot move 100% according to that information. Therefore, we advise our valued clients to do the following:

1. Follow open positions for the possibility of price fluctuations throughout the day without ruling out any surprises in price movement, which requires extraordinary attention.

2. Rely on the main support and resistance levels to follow the price movement and use the chart within large time frames (daily or weekly) and do not rely on the instant support and resistance levels.

Conclusion:

Today’s Fed rate decision represents a pivotal moment for the US economy, with expectations of a third consecutive rate cut to 4.5%. The move is in line with the Fed’s current expectations, highlighting continued economic expansion and a positive labor market, although uncertainty remains due to potential shifts in economic data under the new Trump administration. The outcome of the Fed press conference will be pivotal, providing insights into the central bank’s future policy stance, particularly with regard to inflation, economic growth, and interest rates. Market reactions are likely to be volatile, so investors should be prepared for volatile market conditions and focus on key support and resistance levels while remaining alert for unexpected developments.