The global financial landscape is on the brink of a crucial moment

This week, the Federal Reserve is set to release its final interest rate decision for 2024, while central banks in Japan, the UK, Russia, Thailand, the Philippines, Norway, and Sweden will also announce their interest rate decisionsCurrent futures markets indicate a near certainty that the Fed will opt for a 25 basis point cut.

With the anticipated cut already priced into the markets, all eyes are on what Fed Chair Jerome Powell will communicateAnalysts predict a potential "hawkish cut," opening the door for the Fed to pause further cuts

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If the Fed sends a hawkish signal during this meeting, U.Sequities may face increased pressure to adjust.

It’s also noteworthy that the U.STreasury market has recently been experiencing severe sell-offsJust last Friday, the yield on the 30-year Treasury bond surged to 4.60%, an increase of approximately 28 basis points from the previous week and the largest single-week jump this yearWall Street believes these yields are pricing in a scenario where the Fed holds steady for the time being.

As a "Super Central Bank Week" unfolds, the implications of monetary policy decisions will ripple through global financial markets.

On Thursday (December 19) at midnight Beijing time, the Federal Reserve will unveil its rate decision, with expectations that it will likely cut rates by 25 basis points.

Data indicates that the probability of the Fed maintaining the current rate through December is only 1.4%, while a cumulative 25 basis point cut is predicted at 98.6%. For January, the likelihood of holding rates steady drops to 1.1%, with an aggregate expectation of a 25 basis point cut at 79.9%, and a 50 basis point cut at 19%.

This essentially means that the Fed's third rate cut of the year seems virtually assured.

As the 25 basis point reduction is practically baked in, discussions will focus on Powell's statements.

Analysts from BNP Paribas anticipate a "hawkish cut" this week, suggesting the Fed might leave the door open for a pause in rate cuts, though the timing of any pause remains unclear.

Currently, with strong economic growth and stagnant inflation progress in the U.S., investors have adjusted their bets on future Fed rate cuts for the upcoming year.

Brad Bechtel, an analyst at Jefferies, remarked, "A December rate cut is all but certain, but the pace of future cuts will undoubtedly slow thereafter."

A recent report from Dongwu Securities predicts that the new dot plot could point to a 25 to 50 basis point increase in policy interest rates by 2025, and Powell may hint at future pauses in rate cuts, which would diminish market expectations for cuts in January.

On the data front, this Friday, the U.S

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will release its November Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation measure; retail sales data for November will be out on Tuesday; and the revised annualized quarterly GDP figures will be released on Thursday.

On other fronts, the Bank of England is expected to announce its interest rate decision on Thursday, with widespread market consensus that it will maintain its policy rate at 4.75%, adhering to a gradual reduction policy.

Additionally, the Bank of Japan is also in the spotlight, with increasing speculation about a potential rate hikeEconomists from Nomura forecast a 25 basis point increase to 0.5% this week, but there is a possibility that such a move may be delayed until January or even later.

Nomura states that if the BoJ opts to forego a rate hike in December due to uncertainties or fiscal policies, actions in January could become more likely.

As market conditions persist, the past week saw a divide in U.S

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equity markets hovering at historical highsThe Dow Jones Industrial Average underwent a continuous decline, recording a "seven consecutive down days," while the Nasdaq surged and briefly crossed the 20,000 point mark, hitting new all-time highs.

Wall Street strategists have noted, despite the Nasdaq hitting new records, there is a worrying trend of diminishing momentum supporting U.SequitiesAs of last Friday’s close, the S&P 500 Index recorded a longer streak than in recorded history since 2004: ten trading sessions where the number of declining stocks outnumbered advancing ones.

Analysts opine that if the Fed sends a hawkish signal during this meeting, it could further depress expectations for cuts in 2025, amplifying adjustment pressures on U.S

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equities.

Indeed, the U.STreasury market has shown unmistakable signs of distress, facing ongoing severe sell-offsThe yield on the 30-year Treasury bond soared to 4.60% last Friday, marking an approximate increase of 28 basis points from the previous week and achieving this year’s largest single-week increase.

Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income, noted, "Treasury yields are pricing in a market anticipating the Fed will hold steadyThe economic outlook remains solid, and if inflation exists, it is trending upwards."

In recent news, a weak demand at last Thursday's auction for 30-year Treasuries pushed yields even higher, nearing November's peak.

Moreover, the yield on the 10-year Treasury bond continued its ascent, rising by 25 basis points last week and hitting 4.40%, surpassing the 3-month Treasury yield for the first time since 2022.

This indicates that the inversion between the 3-month and 10-year Treasury yields has been resolved

Analysts suggest that optimistic forecasts for U.Seconomic growth may lead long-term rates to rise even further.

The prevailing market consensus anticipates that the Fed will cut rates by 25 basis points in December and then enact two further cuts throughout 2025; however, some economists hold a contrasting view.

Economists from Deutsche Bank and BNP Paribas both predict that the Fed will not take action in 2025 and will maintain a pause on rate cuts.

BNP Paribas also foresees that the Fed's actions this week will be accompanied by a "hawkish" tone, signaling that no further rate cuts will be forthcoming in the near future; the firm predicts the yield on the 10-year Treasury bond will rise to 4.65% by 2025.

Jason Pride, Head of Investment Strategy and Research at Glenmede, remarked ideally that the Fed should cut rates at this December meeting and then pause in January.

He suggests that the Fed will determine its course of action next year in relation to either two to four more cuts, but mentions there is considerable debate over inflation concerning tariffs and immigration policies stemming from the next government.