The Lombard Review
Economy

The Fed pivots

Dot shift validates market

The Federal Reserve Bank of New York in the Financial District
The Federal Reserve Bank of New York in the Financial DistrictPhoto: Kidfly182 / Wikimedia Commons, CC BY 4.0
1 min read Data: 13 Dec hold; 2024 median 4.6%

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.

Brokers on the floor of the New York Stock Exchange
Brokers on the floor of the New York Stock ExchangePhoto: Thomas J. O'Halloran / Wikimedia Commons, Public domain

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.

Canary Wharf seen from Wapping, East London
Canary Wharf seen from Wapping, East LondonPhoto: Diliff / Wikimedia Commons, CC BY-SA 3.0

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.