📍 #FOMC: The Fed cuts 25bps, raises GDP forecast, lowers PCE forecast, Dot Plot continues to show internal division

📌 #Fed lowers interest rate by 25bps to 3.5% - 3.75%, market had already expected this.
The 9-2 vote shows polarization within the Fed:
- Mester wants a 50bps cut.
- Goolsbee & Schmid want to keep rates unchanged.
- One member wants to accelerate rate cuts further, while the rest do not want to loosen further. The Fed lacks consensus for the upcoming easing cycle after QT ends.

📌 The December Dot Plot is very unusual: 6 dots for unchanged 2025, but only 2 dissenters in the vote.
=> This means many members hold high dots defensively but do not want to oppose the majority.

2026 is even more extreme: Some members favor rate hikes, some want 2-3 cuts, and Mester wants 6 cuts.
=> This is the most fragmented Dot Plot in the Powell era. Forward guidance in the future will have very little value (at least until the Fed reaches consensus again).

📌 SEP (Economic outlook published 4 times a year) by the Fed has changed:
The Fed is more optimistic about growth and less worried about inflation.
- GDP forecast for 2026 has been raised sharply to 2.3%.
- PCE forecast for 2025 has been lowered from 3.0% to 2.9%.
- Core PCE also moved slightly lower.
-> The Fed believes inflation can decrease without trade-offs like a recession.

📌 The policy statement in the Fed minutes differs slightly from previous:
- Describes the economy as “resilient” (resilient).
- No longer mentions "ending #QT", nor any further tightening.
- Reserves in the system are "sufficient" and "ready to buy short-term bonds if needed to ensure market liquidity."

=> Powell did not mention #QE, but this statement leans towards easing.