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Look out for falling interest rates.
Economic forecasters expect the Federal Reserve to cut interest rates by a quarter point Thursday afternoon at the close of a two-day meeting. Together with a half-point cut in September, the reduction would bring the benchmark federal funds rate down three quarters of a point from its 23-year high of over 5%. The Fed hiked rates dramatically in 2022 and 2023 to fight surging inflation.
The cuts could translate to gradually lower loan rates on homes, cars and other consumer goods.
If the Fed acts as expected, then Thursday’s biggest news will come from what the central bank says about future cuts. Analysts expect another quarter-point cut in December, and more next year. Those plans could change, though, if inflation surges anew or the American economy slows.
When is the next Fed meeting in 2024?
After today’s meeting, the Federal Reserve has one more opportunity to consider interest rate moves in 2024.
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The remaining Fed meeting planned for this year is Dec. 17 through 18.
Will the Fed talk about the US election outcome in its rate decision?
Not that we’ll know of, analysts said.
Fed Chair Jerome Powell will likely stay focused on the Fed’s job of promoting maximum employment and price stability, economists said.
“We expect to see Powell’s deflecting and obfuscating skills in full display” when it comes to the Fed’s take on the election, said Michael Gregory, BMO Capital’s deputy chief economist.
Powell will likely stay focused on the Fed’s job of promoting maximum employment and price stability, economists said.
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How will the Fed act on interest rates?
After slashing its key interest rate by a hefty half-percentage point in September, the Fed is expected to lower rates by a more measured quarter point Thursday and several times next year as inflation continues to ease.
But if the Fed veers from that steady pace, it likely would be to reduce rates less sharply to ensure inflation keeps falling, economists say.
That may defy some forecasters’ view that the central bank largely has won the battle against soaring prices and must bring down interest rates swiftly to achieve a “soft landing” that avoids a recession.
The stock market, though, has surged on the prospect of steady rate cuts, and a pause could roil equities.
Has inflation decreased in 2024?
Inflation is falling, but not as quickly as forecasters had estimated. The Fed’s preferred annual inflation measure dipped to 2.1% last month, just above the central bank’s 2% goal. But a core inflation gauge that excludes volatile food and energy items – which the Fed watches more closely – held firm at 2.7% and will likely end the year above the 2.6% forecast by Fed officials.
The cost of services such health care and car repairs continued to climb, in part because of sharp employee pay increases that companies pass along to consumers.
The upshot: The Fed may still need to worry more about an inflation resurgence than a sputtering job market. “It’s not guaranteed that inflation comes down to 2%,” said Barclays economist Marc Giannoni
Barclays estimates core inflation will end 2025 at 2.3%, still above the Fed’s 2% target.
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