SEPTEMBER 23, 2024 – FED CUTS RATES BY 50 BASIS POINTS
The Federal Reserve lowered interest rates by 50 basis points at last week’s meeting. The cut was larger than expected, and the first since the start of covid. The last time rates were cut by half a percent was in 2008 during the global financial crisis. The cut indicates the Fed is confident inflation is moving toward the 2 percent target, and the slowdown in the labor market warranted a bigger move. The dot-plot for the rest of 2024 indicates another 50 basis point reduction in the rate by year end.
Fed Chair Jerome Powell said they are trying to restore price stability without a painful increase in unemployment. Though the Fed approved a rate cut, it left in place its quantitative tightening where they are rolling off maturing Treasurys and mortgage-backed securities, reducing the size of its bond holdings.
The decision to lower rates was unanimous, but Federal Reserve Governor Michelle Bowman dissented on the magnitude. She felt core inflation, which is rising faster than 2.5 percent, has not fallen enough and she is worried to public will misinterpret the larger move as a “premature declaration of victory.”
The Fed meets again in November and December, and even though more rate cuts are expected, future changes will be data driven.