18, 2024 Fed Meeting
Today, September 18, 2024, the Federal Reserve made a pivotal decision to cut interest rates by 50 basis points, marking its first significant reduction since the onset of the COVID-19 pandemic. This move, lowering the federal funds rate to a range of 4.75% to 5%, signals a shift in the Fed’s strategy amidst a cooling economy and easing inflation.
Key Points from the Fed Meeting
- Rate Cut Announcement: The Fed’s decision to cut rates comes after months of speculation, with many analysts predicting a reduction. The 50 bps cut was larger than expected by some, reflecting the Fed’s concern over slowing economic growth and rising unemployment.
- Voting Outcome: The FOMC (Federal Open Market Committee) vote saw 11 members supporting the 50 basis point cut, while Governor Michelle Bowman dissented, advocating for a smaller 25 bps cut. The meeting was closely watched, with Fed Chair Jerome Powell delivering the highly anticipated Fed announcement at 2 PM ET, followed by a press conference at 2:30 PM ET.
- Economic Context: The Fed interest rate cut responds to rising unemployment, now at 4.2%, and inflation, which has dropped from 9.1% in June 2022 to a more manageable 2.5%. The federal interest rate reduction aims to stimulate the economy by lowering borrowing costs, impacting everything from mortgage rates to auto loans and credit card interest rates.
Impact of the Fed Rate Cut on Markets
- Mortgage Rates Today: The rate cut is expected to ease mortgage rates, providing some relief to homeowners and buyers. The lower rates could also influence 10-year treasury yields, which tend to move in tandem with fed interest rate decisions.
- Stock Market Reaction: Markets reacted to the Fed rate cut news with volatility. The S&P 500 and SPY stock showed positive movement, reflecting optimism about lower borrowing costs. However, concerns about long-term economic growth persist, keeping traders and economists closely monitoring the Fed decision and its impact on future monetary policy.
Looking Ahead: Future Rate Cuts?
The Fed’s rate cut today is expected to be the first of several reductions. Projections suggest an additional 50 basis points in cuts by the end of the year, with more possible in 2025, depending on economic conditions. The federal funds rate could see further adjustments as the Fed works to balance its dual mandate of controlling inflation and supporting maximum employment.
- When Will the Fed Announce Rate Cuts Again?: The next FOMC meeting is slated for later this year, and markets will be keenly watching to see if the Fed cuts rates further. The Fed dot plot offers some insight into policymakers’ expectations for future rate movements.
Why Did the Fed Cut Rates Today?
The decision to cut rates today reflects concerns about a potential recession and the need to stimulate economic activity. Fed Chair Jerome Powell emphasized the importance of supporting growth while managing inflationary pressures. This focus on growth is also reflected in the Fed’s willingness to cut rates, despite inflation being under control.
For those tracking financial news, the Fed’s rate cut announcement will have ripple effects across various sectors, from housing to consumer lending. With Jerome Powell’s speech today highlighting the need for economic flexibility, it’s clear that the Federal Reserve is prepared to adjust policy as needed.
Key Terms Related to Today’s Fed Meeting
- Federal Interest Rate: The interest rate at which banks lend to each other overnight, influencing borrowing costs across the economy.
- FOMC Meeting Today: The Federal Open Market Committee gathers to set monetary policy, including decisions on interest rates.
- Fed Funds Rate: The target interest rate set by the Federal Reserve that influences borrowing costs.
- Prime Rate: The interest rate that commercial banks charge their most creditworthy customers, often influenced by the Fed’s interest rate decisions.
What Time is the Fed Meeting Today?
The FOMC meeting started earlier today, with the Fed rate cut decision announced at 2 PM ET, followed by Jerome Powell’s speech at 2:30 PM ET. Traders, investors, and financial analysts were glued to their screens, awaiting the Fed news and market reactions.