The Federal Open Market Committee will announce the resolution of its Dec meeting tonight and will mostly deliver a 25-bps easing. This is already discounted by market participants as seen in CME Fed watch tool. Market participants closely watch potential revision in dot-plot (projected fed fund rate across time frames). The Fed dot plot in Sep meeting showed terminal rate at 3.4% by end 2025, and 2.9% by end 2026. We expect the committee to revise rate projection for 2025 higher to around 3.6% - signaling only 75 bps easing. The overall tone is likely to be cautious, with indication of gradual easing next year in anticipation of the new administration’s reflationary policies. In addition, recent progress in disinflation appears to have stalled – as also seen in consumer and business surveys. Recent data point towards enduring strength in activity as seen in retail sales, services PMI, upbeat job openings and higher quits rate (showing increased labor market confidence). Apart from these, projections for PCE inflation, GDP growth and unemployment rates are also awaited. India yields are expected to trade with an upward bias this week tracking global benchmarks, and continued depreciation in INR. However, we expect the low beta relation with US treasuries to continue given favorable domestic supply
