Live updates on December Fed rate decision

Market participants are getting a little too excited about the prospect of sizeable rate cuts in the new year, according to Wells Fargo Investment Institute’s Scott Wren.

“The market is pricing in around 125 basis points of Federal Reserve cuts by the end of next year,” wrote the senior global market strategist in a note on Wednesday.

“That is overly optimistic in our opinion,” he said. “We do not think the Fed will deliver what the markets are pricing in.”

Instead, Wren anticipates the target range will end 2024 between 4.75% and 5%. Currently, the target rate is between 5.25% and 5.5%.

“Some progress on inflation has been made, and the labor market and the economy are gradually slowing,” Wren said.

–Darla Mercado

The Federal Reserve’s move to hold rates steady for a third time isn’t the main event on Wednesday.

Instead, market participants are eager to see where the central bank stands on its projections for interest rates going forward.

That means the dot plot – the Fed’s grid of individual members’ outlook on interest rates – will be a key focus for traders.

The chart will likely show that the central bank dropped an expected rate hike for 2023, but what’s up in the air is the outlook for 2024 and beyond.

Read more about what investors are watching in the Fed’s announcement.

–Darla Mercado, Jeff Cox