Fed still forecasts just one rate cut for next year

The Fed's latest dot plot has attracted attention as it indicates a median estimate of 3.4% for the federal funds rate by the end of 2026. The market is expecting the Fed to be very cautious with its future interest rate policies, leading to a trading strategy focused on these projections. Notably, only one rate cut is anticipated for the next year, suggesting limited impact on the market compared to previous tightening cycles. Investors need to assess the implications of Fed actions on the demand for the US dollar. If interest rates remain at high levels, the strength of the dollar may persist. Conversely, a diminished expectation of rate cuts could also affect the trading of risk assets. Overall, the Fed's stance significantly influences market psychology, prompting traders to remain vigilant about future developments. Changes in interest rate forecasts will serve as crucial benchmarks for reviewing trading strategies.