Morning Market Brief November 8, 2024

Fed decides on a smaller rate cut

The US Federal Reserve Board (Fed) lowered its federal funds rate at its November meeting. This marked the second straight rate cut from the Fed as it seeks to help support the US economy. All signs point to the Fed cutting interest rates at a relatively gradual pace as it monitors developments in consumer prices and the labour market.

• The Fed cut its federal funds rate by 25 basis points (bps) to a target range of 4.50%–4.75% to help support the US economy. Back in September, the Fed cut rates by 50 bps. It went ahead with a smaller rate cut this time amid relatively solid economic conditions.
• Fed officials pointed to inflation making progress towards its 2% target. Notably, the Fed removed wording from its statement that it is seeking “greater confidence” inflation will reach its target. On the labour front, the Fed says the labour market has slowed, and the unemployment rate has edged higher but remains at relatively low levels.
• Looking ahead, the Fed might be measured and take a gradual approach to cutting rates. The Fed reiterated its commitment to making policy decisions based on incoming economic data. Still, more rate cuts are expected.
• The Fed wasn’t the only central bank in the spotlight yesterday. The Bank of England announced it was lowering its policy interest rate by 25 bps to 4.75%, which was its second rate cut this year.

In his press conference following the announcement, Fed Chair Jerome Powell said the election could have little impact on the near-term decisions of the Fed. The Fed will continue to focus on price stability and maximum employment as it considers its monetary policy decisions. The US economy remains relatively solid so the Fed might be less aggressive in cutting interest rates compared to some other central banks, such as the Bank of Canada.

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