Analysts: Fed's hawkish turn is dangerous for the economy

The Fed’s tone turned more hawkish last week. It expects higher inflation in 2025 than previously estimated and reduced the number of rate cuts it expects next year. Neil Datta, an analyst at Renaissance Macro, wrote that in an economic environment that appears to be slowing, the Fed may be in a disadvantageous position and return to a more dovish stance. He doubts that expectations of Trump administration policies - which Powell acknowledged that some Fed officials have now taken into account - will lead to changes in forecasts for next year, and the Fed "seems to be taking precautions against potential tariff shocks by slowing the pace of rate cuts." "This is dangerous, given that the underlying momentum of the economy seems to have weakened," Datta wrote. (Jinshi)