The Fed announces success in the fight against inflation. What will the week bring?

The December meeting of the Federal Reserve gave the market an unexpected impulse. Over the last two years, the Fed has focused its activities on a decisive fight against inflation, and its policy has been predictable for investors - now FOMC clearly announces interest rate cuts in the coming year. Is this the end of the hawkish Fed?

Will the Fed cool the bull market in stocks?

For the Reserve, 2023 was a year of struggling to meet market expectations, and it might seem that the easing of financial conditions in November would mean adopting a similar strategy also at the December meeting. However, the Fed surprised investors with its rhetoric - it not only made it clear that it did not plan to raise interest rates, but also directly pointed to interest rate cuts in 2024.

For some time now, the market has been pointing to a significant improvement in the US inflation outlook, which may be why the Fed may be starting to lean towards a more dovish stance. Despite this, such a significant turn in communication is surprising for investors, especially considering the recent data publications. Expectations for cuts in the US are currently the strongest in all major currency zones and have increased sharply since the last meeting, and the Fed's announcement itself surprised the markets - a change in the bank's stance may have a more lasting impact on the interest rate, thereby contributing to the weakness of the dollar.

We observe a different approach among bankers EBC, who did not discuss reductions in the coming year. Christine Lagarde admitted that inflation has recently decreased, but the risk of its rebound is still significant and should still be taken into account.

In today's webinar:

• What impact will Fed rhetoric have on markets?
• Will Europe remain hawkish?
• What will happen to the dollar?

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

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