Even the most optimistic wouldn't have dreamed of anything better. The members of the Monetary Policy Committee have singularly altered their positions compared to last September, as the following dot-plot shows.

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Source : Bloomberg

The yellow dots represent the current expectations of the various Fed members, while the grey dots reflect those of September. If all goes according to plan, the US Federal Reserve could cut its key rates by 75 basis points by the end of 2024 to 4.625 (median estimate).

Credibility in question

Admittedly, the market is anticipating twice as much, but in any case, we're a long way from the famous "higher for longer" scenario. We can legitimately question the credibility of the Chairman, who until very recently assured us that the Fed would not cut rates until inflation had returned to 2%. Now, in the space of a few weeks, with Core CPI (excluding energy and food) at +4.0% y/y in November, there is already talk of a rate cut.

Back to the future

If I had to draw a historical parallel, I'd say that the United States is having a "revival" of 1972. In that election year, Fed Chairman Arthur Burns bowed to Nixon's pressure for quantitative easing, causing inflation to take off again just a few months later. Ironically, 50 years on, Joe Biden is hoping to repeat his predecessor's "feat" and win a second term. He claims to anyone who will listen that the Fed is too strict...

In the meantime, the yield on the US 10-year broke through the 4.10% threshold, which should confirm further easing towards 3.26%.