Thursday, November 6, 2024
Today’s long-awaited news (in a week full of long-awaited news items) came from the Federal Open Market Committee (FOMC) this afternoon, which expectedly reduced interest rates by 25 basis points (bps), putting the current Fed funds rate at between 4.50-4.75%. This is the lowest level we’ve seen since March of 2023.
Fed Chair Jerome Powell said the FOMC is “recalibrating from fairly restrictive levels.” So far, the Fed has reduced rates by 75 bps from the year-plus-long range of 5.25-5.50%, which only ended with a 50 bps cut back in September.
In the Fed’s statement ahead of Powell’s press conference afterward, it said the U.S. economy continues to “expand at a solid pace.” The FOMC meets again in mid-December for the final meeting of 2024, and another 25 bps cut is mostly expected. Though language the Fed and Powell himself used today seemed to leave the door open for a pause, data-permitting.
“We are just beginning to think about adjusting the pace of rate cuts,” Powell explained to the press pool. And although he mentioned that the Fed “does not want the labor market to soften much from here,” indicating some trepidations on behalf of employment levels, Powell also said, “The labor market is continuing to very gradually cool,” which is something required for the desired soft-landing.
A few reporters tossed Powell some questions regarding the Presidential Election on Tuesday, but the Fed Chair would not bite. When asked whether Powell would consider stepping down if President-elect Trump asked him to, the Fed Chair’s answer was straightforward: “No.” Powell’s term expires in May of 2026 — more than a year and a half from now.
Stock Market Reaction the Numbers
Market indexes today were mostly flat, with the Dow +0.001, the S&P 500 +0.74%, the Nasdaq +285, +1.51% on the day — the only non-flat performer — and the small-cap Russell 2000 coming in at -0.43%. Beyond this, bond yields had been +4.339% on the 10-year and +4.214% on the 2-year.
While today’s 25 bps cut was already baked into the cake today, the market is more dubious on the December 18th meeting. It will once again come down to economic releases between now and then, including CPI, PPI and Retail Sales for October. Plus we’ll see another Jobs Week and employment report before the next meeting.
Questions or comments about this article and/or author? Click here>>
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Fed Cuts Rates 25 bps; Powell Mum on Election Results
Thursday, November 6, 2024
Today’s long-awaited news (in a week full of long-awaited news items) came from the Federal Open Market Committee (FOMC) this afternoon, which expectedly reduced interest rates by 25 basis points (bps), putting the current Fed funds rate at between 4.50-4.75%. This is the lowest level we’ve seen since March of 2023.
Fed Chair Jerome Powell said the FOMC is “recalibrating from fairly restrictive levels.” So far, the Fed has reduced rates by 75 bps from the year-plus-long range of 5.25-5.50%, which only ended with a 50 bps cut back in September.
In the Fed’s statement ahead of Powell’s press conference afterward, it said the U.S. economy continues to “expand at a solid pace.” The FOMC meets again in mid-December for the final meeting of 2024, and another 25 bps cut is mostly expected. Though language the Fed and Powell himself used today seemed to leave the door open for a pause, data-permitting.
“We are just beginning to think about adjusting the pace of rate cuts,” Powell explained to the press pool. And although he mentioned that the Fed “does not want the labor market to soften much from here,” indicating some trepidations on behalf of employment levels, Powell also said, “The labor market is continuing to very gradually cool,” which is something required for the desired soft-landing.
A few reporters tossed Powell some questions regarding the Presidential Election on Tuesday, but the Fed Chair would not bite. When asked whether Powell would consider stepping down if President-elect Trump asked him to, the Fed Chair’s answer was straightforward: “No.” Powell’s term expires in May of 2026 — more than a year and a half from now.
Stock Market Reaction the Numbers
Market indexes today were mostly flat, with the Dow +0.001, the S&P 500 +0.74%, the Nasdaq +285, +1.51% on the day — the only non-flat performer — and the small-cap Russell 2000 coming in at -0.43%. Beyond this, bond yields had been +4.339% on the 10-year and +4.214% on the 2-year.
While today’s 25 bps cut was already baked into the cake today, the market is more dubious on the December 18th meeting. It will once again come down to economic releases between now and then, including CPI, PPI and Retail Sales for October. Plus we’ll see another Jobs Week and employment report before the next meeting.
Questions or comments about this article and/or author? Click here>>