We have our pivot

Here’s the pivot, as framed by the WSJ.

Dec 1: “It would be premature to … speculate on when policy might ease.”

Dec 13: Rate cuts are something that “begins to come into view” and “clearly is a topic of discussion.”

What a difference two weeks can make.

The formal bit of analytical work to accompany the commentary is shown below; note the fed funds rate projection, current vs September. The 50bps that got shoehorned into September from June has been taken out again in the current set.

And, that drop in rates is in turn due-to/coming-from the range of PCE inflation projections, which downshifted notably.

So that’s it.

The Fed has gone from saying “we aren’t even thinking about thinking about cutting” to not pushing back on the market pricing cuts to now opening the door to cuts in the near term themselves (this is the Waller speech, in which he seemed to flag April 2024).

Powell did not push back, and indeed seemed to endorse the idea.

Market loved it, assets everywhere rallying.

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