Dovish “Bivot”

After Jay Powell did not push back against market pricing last week, even more aggressive expectations for rate cuts emerged. Some FOMC members tried to “fine tune” the Fed’s communication on Friday, with some effect on the market, but we suspect the verdict will come from the data flow. The Fed President – and the market – might get lucky and we could see the resumption of swift disinflation in early 2024, dissipating the ambiguous message from the November CPI print, but we prefer to maintain our expectation of only 75bps of cuts next year and brace ourselves for some volatility in the first few months of next year.