Matthew Ryan, Head of Market Strategy

The dollar has sold-off sharply across the board this evening, after the FOMC delivered an unexpectedly explicit message that lower US rates are on the way in 2024. In its statement, the Fed noted that growth had slowed, while acknowledging the progress made on inflation. The bank also revised its core PCE inflation projections rather sharply lower, pointing to greater confidence among committee members that the ‘final mile’ in the inflation fight may not be quite as much of a challenge as it had previously led us to believe.

​ ​Undoubtedly, the most interesting aspect of the announcement was the bank’s ‘dot plot’ of interest rate projections. The median Fed member now sees a total of 75 basis points of cuts next year, which is a rather more aggressive downward revision than had been anticipated. In his press conference, chair Powell also somewhat surprisingly refrained from pushing back against market pricing for cuts. Not only is this a clear indication that lower US rates are on the way in 2024, but a cut in the first half of next year is now increasingly likely, with a decent chance we see as many as three or four rate reductions through year-end.