BNY Mellon: The Fed is expected to deliver a hawkish rate cut this week, with the dot plot likely to reveal policy divisions.

On December 8, analysts at BNY Mellon stated in a report that the market has fully priced in expectations of an interest rate cut by the Federal Reserve this month, but there is a growing consensus that this will be a hawkish rate cut. This means that further monetary easing will depend on whether economic data released in March and June 2026 weakens or if inflation declines further. The analysts also pointed out that the upcoming change in the Fed chair poses a risk, as the market will assess the policy inclinations of the new leadership. In addition, the FOMC will release its dot plot, which will likely confirm recent internal disagreements within the committee on policy stance. There is an expectation of significant divergence among committee members regarding the policy direction for 2026, reflecting the two-way economic risks we foresee.