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The Federal Reserve is expected to announce a 25 basis point cut to interest rates this afternoon, with the official decision due at 2 PM ET. RBC Global chief economist Frances Donald joins Morning Brief to provide her insights into the future state of monetary policy. Donald highlights the complex economic environment, noting robust growth, stable unemployment, and persistent inflation hovering around 3%. She suggests these conditions will not "allow for a proper easing cycle, even if that's what the Fed wants." Regarding the upcoming Federal Reserve press conference, Donald emphasizes key phrases investors should listen for. Words like "careful" could signal an inflection point, while "pause" might indicate the Fed's strategy of cutting rates and then assessing economic conditions. She's particularly interested in the Fed's perspective on tariffs and their potential inflationary impact. Despite economic uncertainties, Donald forecasts one more rate cut in January. "It's essentially that this Federal Reserve has told us...they don't want rates to be as restrictive as they are now," she tells Yahoo Finance, adding that the central bank "want[s] to get closer to their estimate of neutral." She estimates the neutral rate could range between 3% and 3.50%, though she cautions that the January cut is not guaranteed.
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2024/12/18
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