Atlas Macro

Central banks

Policy Pivot

A fundamental change in the direction of a central bank's monetary policy, typically shifting from tightening (hiking) to easing (cutting), or vice versa.

Key points

  • The most anticipated event in macro trading cycles.
  • A 'Fed Pivot' usually refers to the end of rate hikes.
  • Premature pivots can reignite inflation (e.g., the 1970s error).

Example

A pivot happens when the Fed shifts from "inflation is too high" (hawkish) to "growth is at risk" (dovish).

In history

Between late October and the end of 2023 the S&P 500 rose about 16% as markets anticipated rate cuts. In December the Fed's projections showed three cuts pencilled in for 2024, even though rates stayed at 5.25-5.5%.

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