Will the Fed Deviate from the Dot Plot with Trump Tariffs and Strong economic growth?

Weekly Market Highlights:

1. The 10-year 2034 G-sec yield edged up 2bps to 6.74% for the week.
2. 3M and 6M T-bill auction data yields were at 6.45% and 6.61% respectively compared to 6.43% and 6.54% last week.
3. The INR Bonds High Yield Retail Index stood at 9.77%, up 4 bps fortnightly.
4. India CPI eased to 5.48% in November 2024 v/s expectations of 5.53% on account of easing food prices. The November CPI prompted the RBI to revise its inflation forecast for FY25 from 4.5% to 4.8%.
5. Sanjay Malhotra, a Princeton-educated economist and seasoned bureaucrat, has been appointed as the 26th Governor of the RBI. Economists expect Malhotra to adopt a pragmatic, growth-oriented approach with potential rate cuts in early 2025, while maintaining policy stability to address India’s economic slowdown and inflation challenges.
6. India's Index of Industrial Production (IIP) rose by 3.5% in October 2024, an improvement from 3.1% in September 2024, driven by robust growth in key sectors such as basic metals, electrical equipment, and refined petroleum products.
7. The US CPI rose 0.3% in November, the largest increase since April, after four months of 0.2% gains. Annually, CPI climbed 2.7% in line with expectations, up from 2.6% in October. Despite the seven-month high in inflation, the FED is still expected to cut interest rates next week amid signs of a cooling labor market.
8. The 10Y UST yield was up 25 bps this week to 4.4% amid higher than expected PPI data and as investors await FED’s final meeting this year.
9. ECB cut rates by a quarter point to 3%, 4th time this year amid signs of weakening growth and a possibility of US tariffs.