Diane Swonk is betting that the Federal Reserve will cap off 2024 with one more 25bps rate cut that will allow it to meet its median forecast for a total of the 100 bps in rate reductions for the year. With the labor market showing showing some weakening from its highs and inflation within spitting distance of the Fed’s 2% target, Diane’s baseline is that the Fed will see this as the right and prudent step to take - with some caveats.
Today at the press conference after the Fed announced its decision, Diane says, Powell “left the door open to another rate cut in December, but it's all data dependent, on a meeting by meeting basis. There's no forward guidance here. And I think clearly (Powell’s) message was we don't exactly know the pace of cuts going forward. We think we're going to slow them at some point in time as we … continue to cut and start to approach what they think is a non- inflationary rate.”
So what does Diane think could make them decide not to cut the key rate next month?
“I think it's pretty easy to figure out what could cause them to pause is, you know, a combination of a really good employment number coupled with another not as good inflation number.”
Diane notes that Powell did admit at the post-FOMC meeting that the latest inflation report wasn't as good as he has hoped for.
”Powell knows the math is in his favor as he gets into 2025, but at the end of the day, you know, he's these next two inflation reports and one employment report are going to determine whether or not the Fed moves or not in December,” she says. “And I think that's, you know, it's hard because it makes the financial markets on every single data point, you know, just super, super reactive.”
We looked at a a lot of the big issues facing the Fed as it heads into 2025 with the nation’s burgeoning budget deficit leading to expectations that fiscal dominance will be a key challenge for bond markets and Fed policy makers to address. So dive in and let Diane help you get ready to ride the 2025 Federal Reserve wave.
Diane Swonk is the Chief Economist at KPMG U.S. Shestarted her career with money-center bank First Chicago and has won many awards in her career for her excellence in her profession and leadership in the broader business community. She climbed from entry-level to Director of Research and Chief Economist at Bank One, the merged bank. Before joining KPMG, Diane had her own economic consulting firm and worked at Grant Thornton. She spent the prior 10+ years as Senior Managing Director and Chief Economist at the financial services firm, Mesirow Financial.
She served as an advisor to the Congressional Budget Office (CBO) and the National Economic Council (NEC) on a nonpartisan basis. She regularly briefs the regional Federal Reserve banks and the Board of Governors in Washington, DC. She has provided Congressional testimony on income inequality and how to preserve and bolster the quality of government statistics on the economy.
She was honored by her peers as Fellow of the National Association for Business Economics (NABE) for her outstanding contributions to the field. She serves on the NABE statistics committee to advocate for better information on the economy. Diane serves on the board of the Posse Foundation in Chicago, an organization dedicated to increasing access to higher education. She is active in supporting scholarships and programs to diversity the ranks of economists with more women and underrepresented minorities with her alumni groups and work on the NABE Foundation. She is a member of many business groups, including the Economic Advisory Board of the US Chamber of Commerce, and the Council on Foreign Relations.
Diane recently took over the growing economics team at KPMG to serve partners and clients, and to engage with the media to help showcase the firm’s many achievements. Diane was named one of the top 50 most influential economists during the pandemic. She has won numerous awards through the financial press and been recognized for her excellence in forecast by the regional Federal Reserve banks.
Swonk Sees Fed Rate Cut in December, Says Inflation, Jobs Report Hold Key