The US Federal Reserve announced its seventh policy decision for 2024 after a two-day Federal Open Market Committee (FOMC) meeting and slashed its benchmark interest rate by (25 bps) a quarter of a percentage point to 4.50-4.75 per cent. US Fed chair Jerome Powell-led rate-setting panel cut the federal funds rate for the second straight meeting after reducing the policy rate in September 2024 for the first time in four years on cooling price pressures.
The US central bank maintained the key borrowing rate at the 23-year high for 14 consecutive months since July 2023 to combat the worst inflation outbreak in almost 40 years. In its policy statement, Fed policymakers said the inflation gauge has eased to 2.1 per cent in September, while economic growth has remained robust. Fed added the labour market has stayed strong despite a sharp hiring slowdown last month due to weather conditions and a labour strike.
Follow Live Updates: US Fed Meeting Live Updates-Wall Street logs best Fed day in 2024 after Powell-led FOMC cuts key rates by 25 bps
1.US Fed slashes key rates by 25 bps after Trump's election results
The US Federal Reserve shrugged off concerns about the impact of Donald Trump's election victory on interest rates and moved ahead with a quarter-point cut. US Fed policymakers ignored the political drama up the road, voting unanimously to reduce interest rates by 25 basis points to between 4.50 and 4.75 per cent.
"In the near term, the election will have no effects on our policy decisions," Fed Chair Jerome Powell told reporters, noting there was still uncertainty about what President-elect Trump's actual economic agenda would be. "We don't guess, we don't speculate, and we don't assume," he said.
The US central bank's rate decision should help ease the costs of mortgages and other loans -- welcome news for consumers, who had widely cited the cost of living as a top concern ahead of Tuesday's vote.
But the cost of borrowing will also depend on how financial markets think a Trump victory will impact the economy over the longer term and where the Fed's interest rates will need to settle to ensure inflation remains now.
2.US Fed chair Jerome Powell to not leave early even if asked by Donald Trump
Powell -- whose term as Fed chair ends in 2026 --said he would not resign if asked to leave early by the president-elect, adding that firing any of the Fed's seven governors was “not permitted under the law.” Given the US president-elect's recent criticism of the Fed, his comments underscore the delicate balancing act policymakers may have to play in the next Trump administration.
On the campaign trail, Trump repeatedly accused Powell- whom he first appointed to run the US central bank- of working to favour the Democrats and suggested he would look to replace him once his term as Fed Chair ends.
The president-elect has also said he would like "at least" a say over setting Fed interest rates, which is not currently allowed under the bank's dual mandate from Congress to tackle inflation and unemployment independently.
Fed governors are nominated by the President and appointed by the Senate to serve a 14-year term. If a Fed governor retires, they can also be appointed to serve out the remainder of a 14-year term, and they must then be reconfirmed. If he wanted to, Powell could stay on as a governor after he steps down as Fed chair and serve out the remainder of his term, which expires in early 2028.
3.Powell confident on US economic growth, flags patient approach on rate cuts
"This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time," Fed Chair Jerome Powell said in a post-policy press conference
“We think that the economy and our policies are both in a very good place, a very good place.” At the same time, Powell gave little guidance on how fast and far the Fed will cut rates from here.
He noted that while the September "baseline" projections for gradually moving the policy rate toward the neutral level, where economic activity is neither stimulated nor restrained, are still valid, the exact pace of cuts and their ultimate destination will depend on incoming data.
"We're trying to steer between the risk of moving too quickly and perhaps undermining our progress on inflation or moving too slowly and allowing the labor market to weaken too much," he said. "We think that the right way to find neutral, if you will, is carefully, patiently."
4.US Fed to slow down pace of balance-sheet runoff
In its policy statement, the US Fed said, ‘’The Committee will continue reducing its holdings of Treasury securities, agency debt and agency mortgage‑backed securities.'' The Fed had announced it would scale back the pace at which it is shrinking its balance sheet starting on June 1, allowing $25 billion in Treasury bonds to run off each month compared to the current $60 billion.
5.Wall Street logs best Fed day of 2024
US stocks hit fresh all-time highs, climbing alongside bonds and commodities, in a concerted cross-asset advance that by one measure was the best for a Federal Reserve day in 2024. The S&P 500 and Nasdaq powered to fresh records Thursday after the Federal Reserve cut interest rates, extending a buoyant post-election rally.
While the Dow finished essentially flat, both the S&P 500 and Nasdaq jumped to new all-time highs, with large tech companies like Facebook parent Meta and Apple surging. The tech-rich Nasdaq Composite Index led the indices, climbing 1.5 per cent to 19,269.46. The broad-based S&P 500 gained 0.7 per cent to 5,973.10, while the Dow Jones Industrial Average remained at 43,729.34.
