Fed Weighs Cautious Rate Cut

FINANCE
Fed Weighs Cautious Rate Cut

Federal Reserve officials are grappling with whether to deliver a third consecutive rate cut this week or signal a pause. Chair Jerome Powell is navigating mixed signals: a firmer labor market and modest inflation gains versus concerns over persistent inflation and economic uncertainties tied to President-elect Trump’s proposed tariffs and worker deportation policies.

Investors expect a 25-basis-point cut, bringing the Fed’s benchmark rate to 4.25%-4.5%. However, some Fed members worry that further cuts could erode the central bank’s credibility, particularly if inflation remains elevated. Dallas Fed President Lorie Logan compared excessive cuts to a ship mistaking mud for deep water.

Others, including Powell, remain cautious about cutting too little. “We’re mindful of the risk that we go too far, too fast, but also of the risk that we don’t go far enough,” Powell noted.

Economic sectors sensitive to high rates, like housing, have yet to feel relief. Meanwhile, hiring remains steady but slow, with unemployment creeping up to 4.2%.

Behind closed doors, Powell faces the challenge of aligning an 18-member committee amid inflation’s inconsistent behavior. As the Fed aims to balance competing risks, this week’s decision will shape its 2024 monetary policy trajectory.

FINANCE
Dollar Faces Decline in 2025

The U.S. dollar, buoyed by President-elect Donald Trump’s policies and strong economic data, is nearing a potential peak, with analysts predicting a decline in the latter half of 2025. Wall Street strategists, including those from Morgan Stanley and JPMorgan, expect the dollar to lose ground as Federal Reserve interest-rate cuts erode its strength. Societe Generale forecasts a 6% drop in the ICE U.S. Dollar Index by year-end 2025.

This year’s rally, the strongest since 2015, has been fueled by optimism over Trump’s tariffs and tax cuts. However, economists warn these policies could increase inflation and complicate the Fed's rate trajectory, pressuring the dollar. The Bloomberg Dollar Spot Index has already gained 6.3% this year.

Currency experts suggest falling U.S. yields and improving global risk appetite could weaken the greenback. Additionally, Trump’s hawkish trade stance and potential economic shocks from tariffs may further challenge dollar dominance.

FINANCE
Broadcom's AI Revenue Soars 220%

Broadcom has joined the elite ranks of U.S. companies with a $1 trillion market capitalization, fueled by a 20% surge in its stock price following strong quarterly results. CEO Hock Tan revealed that the company’s AI business is accelerating rapidly, with AI revenue growing 220% to $12.2 billion last quarter. This growth propelled total semiconductor revenue to a record $30.1 billion, driven by customizable XPU chips and Ethernet networking solutions.

The AI frenzy has positioned Broadcom alongside Nvidia as a top semiconductor player, with both benefiting from soaring demand for chips that power AI models. Broadcom recently added two major cloud customers to its roster, joining hyperscalers like Microsoft and Alphabet.

Bank of America raised Broadcom’s price target to $250, predicting AI revenue could more than double to $30 billion by 2027. Shareholders were also rewarded with an 11% dividend hike, highlighting Broadcom’s robust financial momentum.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.