The Federal Reserve made the decision to cut interest rates by a quarter point, marking the second consecutive rate cut in an effort to adjust monetary policy. The move brought the benchmark overnight borrowing rate to a target range of 4.50%-4.75%. This decision was widely anticipated by the markets and was supported unanimously by the Federal Open Market Committee.
The post-meeting statement indicated a few changes in how the Fed views the economy, specifically noting that the risks to achieving employment and inflation goals are roughly balanced. The Fed officials have justified the easing policy as a way to prioritize supporting employment alongside addressing inflation concerns.
The decision to cut rates comes amid a changing political landscape, with President-elect Donald Trump's victory in the recent election. Economists expect his policies to potentially impact inflation, and his dynamic with Fed Chair Jerome Powell could influence future policy decisions.
Looking ahead, questions have arisen regarding the pace of future rate cuts and the Fed's terminal point for interest rates. Traders anticipate another quarter-point cut in December, with a pause in January to assess the impact of previous moves. The Fed's goal is to achieve a "soft landing" for the economy, balancing inflation and growth without causing a recession.
Despite the rate cuts, markets have not responded as expected, with Treasury yields and mortgage rates increasing since the September cut. The Fed continues to monitor inflation indicators, with the most recent data showing a 2.1% 12-month rate. Moving forward, the Fed will continue to evaluate economic data and adjust policy as needed to support the economy.