Fed meeting today: rate cuts, Powell speech, live news and analysis

On By Littum

Thank you for joining us. Here are five key takeaways from Wednesday’s interest rate decision by the Federal Open Market Committee and Federal Reserve Chairman Jerome Powell’s press conference:

  • Fed delivered expected quarter point reductionbringing the year’s total reductions to 100 basis points. This completes the Fed’s policy realignment, and the US central bank will move forward more cautiously, Powell said. In a surprise move, Cleveland Fed President Beth Hammack, who first joined the FOMC this year, dissented in favor of keeping interest rates steady. It was the first dissent by a regional president since 2022 and is indicative of a more bipartisan committee as the bank makes less progress than expected in cooling inflation.
  • The big surprise came from the Fed’s projections for politics going forward. While economists had predicted a slowdown next year, policymakers made just two cuts (three is what most expected) for 2025 and don’t see inflation returning to the 2% target until 2027 (it was 2026 previously).
  • At the press conference, Powell said the Fed will now cut interest rates when it sees further progress inflation. He declined to lay out a more precise path for cuts in 2025, saying it depends on how the economy develops.
  • The incoming Trump the administration has clearly changed the expectations for next year. Powell said some Fed officials have begun to incorporate potential new policies into their forecasts, but the exact policies to come and their impact on the economy remain highly uncertain. Another factor that may ultimately keep interest rates higher than previously thought is the idea that neutral course interest has moved up recently. Fed officials again raised their estimate of that.
  • Shares headed for their worst Fed decision day since at least January, when policymakers had warned that it would not be appropriate to cut interest rates until they had more confidence that inflation was on the way to 2%. The SP 500 fell by 2% at 15.35 in New York. Two-year government interest rates rose 11 basis points to 4.35 per cent. The dollar rose.