FEDERAL RESERVE press release Simplified 
The Federal Reserve Open Market Committee voted to cut the Fed Funds rate by 50 basis points!
4 Things to know:
- The Fed reduced the Fed Funds rate by 50 basis points to a range of 4.75% to 5.00%.
- The Fed’s dot plot (each officials projection of short-term interest rates) indicates 2 additional cuts of 25 basis points by the end of 2024. And 2 meetings remain (Nov & Dec) to accomplish this.
- The Committee stated, “ The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance”.
- Mortgage rates post-decision are relatively unchanged.
Prior to today’s decision, the financial markets had priced in a 100% probability of a 25 basis point cut and a 60% probability of an additional 25 basis point cut. This is quite unusual to get all the way to decision day without arriving at a consensus. After the dust settled, the Fed landed on the full 50 basis point cut citing the progress made on lowering inflation and the balance of risks (Inflation & Employment). The decision had only 1 voter who dissented preferring a cut of only 25 basis points.
Text of the statement, with a few items highlighted:
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
So, let’s look ahead at what we have coming for Q4 of 2024…it’s a lot!
- October will offer the usual economic reports: Employment report on 10/4, CPI on 10/10 followed by PCE on 10/31.
- November kicks off with the Employment Report on the 1st. Following this we have US elections on the 5thand then we’ll pile on a FOMC decision 2 days later (cut please!). We have the CPI and PCE inflation reports on 11/13 and 11/27 respectively. Then top it off with the Thanksgiving Day holiday and a Lions win over the Chicago Bears !! I am pretty certain I will be over-serving myself on that day….drinks that is!
- December will wrap up the year with our usual Employment report on 12/6 and inflation reports on 12/11 and 12/20. Finally, we’ll have the last FOMC meeting decision of 2024 (on the 18th). Then Holiday mode!!
And these are just the events we know about. So, buckle up as it is going to be an exciting (and volatile) finish to 2024!
Econostud of the month – Adam Smith:
Wait, who’s this? The Econostud has always been a current member of the FOMC. Well, I’m throwing you a curveball this time. But think about it, his best -known work was completed 249 years ago and we still discuss it to this day…well at least the finance nerds do.
So, who was he and what concepts did he develop which have passed the test of time? Our very own Navigator (shorty/navigator) provides the following summary:
Adam Smith (1723-1790) is considered the father of modern economics. He is best known for his work “An Inquiry into the Nature and Causes of the Wealth of Nations,” which outlined the concept of the “invisible hand” of the free market. Smith argued that individuals pursuing their own self-interest in a free market would ultimately benefit society as a whole. His ideas on capitalism and economic liberalism, including the division of labor and the role of government, continue to influence economic thought and policy today.
A great book if you have the interest and the topics still remain relevant today!
Enjoy!