Powell recently affirmed that we will see rate cuts this year, even if the timing is … well, uncertain. If rates do fall, it will mark the end of a monetary policy tightening regime that started out weird and never looked back.

Recent economic data can tell completely different stories depending on where you focus. But one point of view has been remarkably consistent this year: the market does not seem to care about any of it.

As goes January, so goes the year. That remains to be seen, but last month does have a twofold lesson for the year.

The drama around the timing of the Federal Reserve’s first cuts to the key short-term interest rate continued in last few weeks of the old year and into the first week of the new year.

A few weeks ago, with the narrative of rates being higher for longer taking firm hold, the December FOMC meeting would likely have been less of an attention-grabbing event. But that was last month.

The Federal Reserve's November meeting went as the market expected: no change in rates. What wasn't expected was the October and early November rollercoaster of bond yields

The post-2008, pre-pandemic era of low rates, low inflation, and ever-expanding values is firmly in the rearview mirror. The term used by one regional Fed president for what we're seeing now is "high-pressure equilibrium," where low unemployment and positive growth co-exist in tension with inflation that is above the Fed’s long-term target of approximately 2%.

For most of the summer, increasingly positive data releases fed into the market’s upbeat view of the economy. August challenged the market’s optimism.

The doom-and-gloom scenario of an all-but-inevitable recession seemed to be replaced by something that looked like optimism around the prospect of a soft landing.

The Fed finally hit "pause" on interest rate increases in June after fifteen months and ten consecutive rate hikes, and it’s become clear that it is only a brief pause.

Throughout the month, the markets focused on the debt ceiling negotiations and the likely impact to government spending – or at least the increased uncertainty around what spending would be. At the end of the month, the FOMC minutes from the early May meeting were released.

The biggest news in the Fed’s statement after their meeting on May 3 was what it didn’t say.