The Federal Reserve reduced its policy interest rate by 50 basis points, bringing it to a range of 4.75% to 5%, while hinting that additional cuts are likely. This move reflects the central bank’s growing confidence in managing inflation and a cooling labor market.
Economic Calendar on 19/09/24
Fed Chair Jerome Powell expressed optimism that inflation will continue to decline in the coming months, signaling a shift in the central bank’s focus toward addressing weaknesses in the labor market.
Citi analysts noted that this rate cut completes the Fed’s pivot from combating inflation to tackling labor market concerns. They also forecast that the Fed is likely to implement another 50 basis point cut if upcoming employment reports remain weak, ahead of its November meeting. By the end of 2024, Citi expects the Fed to have reduced rates by a total of 125 basis points, including an additional 25 basis point cut.
Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, D.C., on Sept. 18, 2024
“Powell emphasized that today’s 50 basis point cut reflects a commitment to not fall behind the curve, suggesting the likelihood of further large cuts if necessary,” Citi analysts wrote. They added that Powell appeared cautious about payroll growth, indicating that continued labor market weakness could prompt more aggressive monetary easing by the Fed.
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