Fed Plans to Cut Rates in December and January: RBC Analysis

RBC's forecast of the December 17-18 Federal Open Market Committee (FOMC) meeting, expecting a 25bp rate cut at this meeting and then again at the January 31-February 1 2025 meeting,

• the pace of the discount has already slowed
• Recent communications from Fed spokespeople continue to indicate further but smaller rate cuts

After February's rate cut RBC expects the Fed to pause and reassess.

RBC points to improvements in the economy, saying the November jobs report was largely as expected

• gentler deceleration more consistent with normalization than cyclical weakness

Regarding the inflation report due this week (preview here:

Bank of America on upcoming US CPI report – rally vs volatility):

• Absent a significant upside surprise that could increase the likelihood that the Fed will choose to hold off on rate cuts, we believe the data remains soft enough to argue for a 25-bps cut from December.