The Fed is poised to announce the latest interest rate move in the wake of Trump’s election victory

The Federal Reserve on Thursday is expected to announce its next policy move on interest rates in the wake of the election and after an influx of economic data.

Policymakers at the Federal Open Market Committee (FOMC) are expected to announce a 25 basis point cut, lowering the benchmark federal funds rate to a range of 4.5% to 4.75%, down from the previous range of 4.75% to 5%.

The expected cut follows a larger-than-usual cut of 50 basis points in September, which was the first rate cut in four years after inflation rose to a 40-year high following pandemic-related supply chain disruptions and an influx of federal spending on relief measures and other measures.

Fed Chairman Jerome Powell is scheduled to hold a press conference after the Fed’s announcement, where he will take questions about the central bank’s plans for interest rate cuts or pauses at upcoming meetings.

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Federal Reserve Chairman Jerome Powell and the FOMC are expected to announce a 25 basis point rate cut on Thursday. (Seth Herald/Bloomberg via Getty Images/Getty Images)

The Fed’s policy meeting comes as inflation has continued to show signs of cooling even as prices remain stubbornly high. It also comes after a weaker-than-expected jobs report raised concerns about the health of the labor market.

Last week, the Commerce Department released data showing that The Fed’s preferred inflation gauge – the private consumption expenditure index (PCE) – rose 2.1% compared to September a year ago. That was down slightly from 2.3% in August as price growth continued to slow. The Federal Reserve is focusing on the PCE headline as it looks to bring inflation back to its 2% target. Core PCE, which excludes volatile food and energy prices and is seen as a better gauge of inflation, rose 2.7%, little changed from a month ago.

Ministry of Labour job report for October found that the US economy added just 12,000 jobs, well below the 113,000 gain predicted by LSEG economists. It marked the lowest monthly jobs figure since December 2020 — although a strike by 33,000 unionized machinists at Boeing and economic dislocation caused by hurricanes Helene and Milton contributed less than expected to job gains.

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The market’s expectations of a rate cut of 25 basis points on Thursday were unchanged afterwards The victory of the newly elected Trump over Vice President Harris, although they have changed slightly for the Fed’s meetings in the coming months.

The likelihood that the Fed will move forward with another 25 basis point cut to a range of 4.25% to 4.5% in December fell slightly to 67.2% from 77.3% on Wednesday. after the electionwhile the chance that the Fed will keep interest rates steady rose to 31.2% from 22%, according to CME FedWatch.

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Powell may provide insight into the Fed’s thoughts on interest rates in the coming months. (Photographer: Ting Shen/Bloomberg via Getty Images / Getty Images)

“We think the key takeaways for the December FOMC meeting will be the two CPIs and the one jobs report between now and then,” Michael Feroli, chief U.S. economist at JP Morgan, wrote in an analyst note. “At the margin, the election results may have lowered the odds of a cut by a small amount, as the rise in risk assets could be a factor in the discussion.”

“After December, we now see the Fed easing at a quarterly pace, with the next easing in March and continuing until the funds rate reaches 3.5%,” Feroli wrote.

Uncertainty surrounding the Fed’s rate cut plans in 2025 is reflected in CME FedWatch’s probabilities for the January meeting. The market sees a 53% probability of rates at 4.25% to 4.5%, which would imply a 25 basis point cut after a cut of the same size this month. That’s up from a 47% probability on Election Day.

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After the election, the likelihood of a more aggressive rate cut in January fell to a range of 4% to 4.25% from 41% to 26.9%, while the likelihood of the Fed keeping rates at 4.5% to 4.75%, increased from 10.6% to 19.2%. after the election.

The Fed is scheduled to hold its next political meeting on the 17th-18th December, while its January meeting is scheduled for 28-29 January.