After the November meeting, the Federal Open Market Committee (FOMC) announced their unanimous decision to cut the target range for the federal funds rate by 0.25%. The decision to cut was widely expected. Some takeaways:
- As widely expected and well-choreographed, the Federal Open Market Committee (FOMC) unanimously cut the target range for the federal funds rate by 25 basis points (0.25 percentage point).
- The risks to inflation and employment are roughly in balance, but the economic outlook still remains uncertain, so the Fed is attentive to both parts of their dual mandate.
- Market reaction was fairly muted immediately following the release, although investors began questioning the magnitude of rate cuts in this cycle.
- The Fed might pause in December if conditions warrant, but a more likely outcome is a pause in January. Investors are searching for equilibrium after reeling from such large moves in rates over the course of the last two months.
The Fed will update their summary of economic projections at their next meeting on December 18, and the focus will be on the number of cuts in 2025, a year where inflation should ease but could remain above the Fed’s target of 2%. We should expect some choppiness heading into the new year as investors reset capital market assumptions