NOVEMBER 11, 2024 — RATES DROP BY 0.25 PERCENT
The Federal Reserve met last week and cut rates by a quarter of a percent, as expected. The benchmark rate has now fallen into a range of 4.5 to 4.75 percent. There remains an expectation for a further similar cut to take place in December. Fed officials want to lower rates enough to slow the recent rise in the unemployment rate, but not affect the cooling of inflation.
As far as rate cuts into 2025 go, there is great uncertainty. The change in administration in the US will mean a revamping of trade and fiscal policy, raising risks for inflation to rebound. Until the true depth and impact of Trump’s plans are assessed, the Fed will err on the side of caution. Fed Chair Powell said last week that “It’s not a good time to be doing further guidance — there’s a fair amount of uncertainty. The point is to find the right place and destination as we go.”
Some worries are that mass deportations will raise wages, tax cuts will encourage spending and tariffs on imports will be passed onto consumers, all stoking inflation.