In the latest Federal Open Market Committee (FOMC) meeting, a majority of Federal Reserve officials supported a 50 basis point rate cut, citing inflation moving closer to the Fed's target and a weakening labor market as key factors. This group believed a larger reduction was necessary to stabilize the economy.
However, some participants favored a more cautious 25 basis point cut, arguing that it would provide sufficient monetary easing without being overly aggressive. Another perspective emphasized that the overall direction of rate cuts was more important than the size of the initial reduction, suggesting that the broader trajectory of monetary policy would have a greater long-term impact.
Source: Federal Reserve
Global markets opened the week with the euro hovering near two-year lows as diverging central bank policies and soft Eurozone data pressured the currency.
Detail
Dollar Index Rises as Rate Cut Expectations Drop (30 Dec - 03 Jan)The Dollar Index rose slightly as 2025 rate cut expectations dropped to 35 basis points. EUR/USD fell on Lagarde's dovish remarks, while GBP/USD declined due to BoE rate cut votes and weak Q3 GDP. The yen weakened as mixed data and BoJ caution on rate hikes outweighed higher Tokyo inflation.
Global markets saw the euro slip toward a two-year low as the ECB signaled further easing.
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