FOMC cuts interest rates as expected and sticks to its line on future policy

The Federal Open Markets Committee (FOMC) cut interest rates by 25 basis points at its November meeting as expected, while maintaining its outlook and guidance for future economic activity and policy conditions.

FOMC cuts interest rates by 25 basis points as expected

Wall Street ran to record highs after one of the most vanilla FOMC decisions in recent history. Already juiced-up by the Trump-trade, US equities, led by tech stocks, made another leg higher as the Fed delivered almost exactly what was expected from it. Rates were kept on hold, guidance was more or less the same, with Chairperson Powell remaining coy about changes to the outlook and deferring to December’s next Summary of Economic Projections, and questions about politics and future fiscal settings were battered away on the principle that, whatever happens, the Fed is simply data dependent. There were a few tweaks in the FOMC’s statement, including modifications to the phrases “greater confidence” and “further progress” to reflect the Fed’s new assessment of risks. However, that came as no surprise to the markets, which, despite the signs of resilient labour market activity and slightly sticky price pressures, were in sympathy with the Fed’s previous guidance and commentary.

_{(Source: Trading Economics)}
(Past performance is not a reliable indicator of future results)

Chairperson Jerome Powell was peppered with questions about the potential influence of President Elect Donald Trump on the central bank, monetary policy, and its leadership. The clearest and most emphatic message from Powell was when asked whether he could be fired by the President and whether he'd step down if asked to, to which Powell replied “No”.

Wall Street hits record highs as US Dollar pulls back

The FOMC decision added momentum to moves that were already underway. Wall Street’s rally signalled even greater bullishness. While the Dollar continued to unwind it’s post-election rally, boosting the AUD/USD and commodity prices. Gold has resurged, keeping its uptrend intact, with its underlying bullish fundamentals, supported by the view of higher deficits, debt and inflationary risks, not to mention geopolitics, reasserting themselves.

_{(Source: Trading View)}
(Past performance is not a reliable indicator of future results)

Interest rate futures continue to imply a likely rate cut from the Fed in December, with the markets indicating an approximately 70% probability of a cut.

_{(Source: CME Group)}

References

• https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
• https://www.federalreserve.gov/monetarypolicy/files/monetary20241107a1.pdf
• https://tradingeconomics.com/united-states/interest-rate

Related topics

#Economic news

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