The Fed pivots

Jerome Powell completed his historic rhetorical pivot at the December FOMC meeting, handing financial markets an early holiday gift. In holding the benchmark rate steady at 5.25–5.50 per cent, the committee updated its dot plot to show three rate cuts in 2024, lowering the median year-end projection to 4.6 per cent. Powell explicitly acknowledged that rate cuts are entering discussions as inflation subsides.

Surrendering to the Curve

By actively validating the market’s easing narrative rather than leaning against loosened financial conditions, the Fed signaled that its focus has shifted from inflation risk to protecting economic growth. The pivot ignited a ferocious 'everything rally', driving sovereign yields lower, equity indices to record highs, and credit spreads to historical tights. The central bank has effectively declared the tightening cycle finished.

Powell’s December pivot marked the official end of the monetary tightening campaign, confirming that the central bank is prepared to ease policy before inflation has fully returned to target.