FOMC Meeting: Key Takeaways

November FOMC meeting | November 7, 2024

The Federal Open Market Committee (FOMC or the Committee) reduced the federal funds rate by 25 basis points (100 basis points (bps) equal 1%) to 4.50% – 4.75%, continuing with the interest-rate-cutting cycle that started in September. The Committee still believes that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The Federal Reserve (Fed) continues reducing its holdings of U.S. Treasury securities and agency mortgage-backed securities, under the updated monthly cap of $25 billion and $35 billion, respectively.

• Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.
• In support of its goals, the Committee decided to lower the target range for the federal funds rate by 25 bps to 4.50%-4.75%. Still, the economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate (price stability and full employment).

• In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• The Committee will continue to take into account a wide range of information including readings on labor market conditions, inflation pressures, inflation expectations, and financial and international developments.

• The Fed meeting today provided little drama for market watchers as a 25 bps rate cut was fully expected. This meeting lacked a release of economic projections or “dot plots”, further reducing the potential for surprises. We will get an update to the summary of economic projection at the December meeting. We still expect an additional 25 bps rate cut in December. We believe the Fed will proceed cautiously in 2025, assessing if President Trump’s economic proposals eventually become actual policies and how those policies end up affecting inflation, labor markets and overall economic growth. As always, the Fed will be led by the economic data. We currently expect 75 bps in cuts in 2025. We continue to expect positive fixed income returns mostly supported by the yield (income) component. We believe fixed income investors may benefit by being favorable on the intermediate portion of the curve, 3–7 year maturities.

• December 18* | January 29 | March 19* | May 7
  

  *Indicates the meeting is associated with a summary of economic projections. In addition, every meeting will be accompanied by a press conference.

Forecasts and targets are based on certain assumptions and on views of market and economic conditions which are subject to change.

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