Fed cuts rates 25 bp, as expected

“A lot of commentary has been written about how being data dependent this cycle has led to being late. And at some point they are going to have to address that and decide if they still want to be data dependent and therefore run the risk of being late.”

UTO SHINOHARA, SENIOR INVESTMENT STRATEGIST, MESIROW, CHICAGO

“The U.S. dollar has pulled back from the gains it saw following the recent election, as the market’s focus shifted towards the looming Federal Reserve policy decision.

“As expected, the Federal Reserve lowered interest rates by 25 basis points, a move that was widely anticipated by market participants.

“While the comments indicate that labor and inflation are ‘roughly in balance,’ noting that inflation ‘remains somewhat elevated’ indicates that the cutting cycle will continue to be data-dependent.

“Fed Chair Powell is likely to communicate a ‘wait-and-see’ approach with another key jobs report and inflation data coming before the next FOMC meeting. A similar cautious tone would not be surprising regarding questions around longer-term policy changes and their impacts, given the freshness of the election results.”

MATTHIAS SCHEIBER, GLOBAL HEAD OF PORTFOLIO MANAGEMENT AT ALLSPRING GLOBAL INVESTMENTS SYSTEMATIC EDGE TEAM, LONDON

“The cut was widely expected based on recent inflation progress, and while economic data remain robust, it was broadly welcomed as a sign that the Federal Reserve is keen to bring inflation-adjusted yields down further. A Republican sweep seems very likely, and looser fiscal policy as well as trade tariffs might lift not only growth but also inflation. Market expectations for a December rate cut have moved down.

“That said, the inflation rate has continued to improve. This will likely lead to a less aggressive rate-cutting cycle compared with what the market was expecting back in September when the Fed started its cuts. The key data points we’re monitoring concern the labor market – the key challenge for the U.S. economy moving forward.”

MICHELE RANERI, VICE PRESIDENT AND HEAD OF U.S. RESEARCH AND CONSULTING AT TRANSUNION IN CHICAGO (in an email)

“Today’s rate cut indicates that the Fed has continued to see positive signs when it comes to inflation and the economy as a whole following its last rate cut. It is anticipated that there will be subsequent cuts as we move into 2025. The hope is that this will continue to stimulate consumer activity in the credit market, particularly when looking at credit products that have been sluggish in recent quarters.

For example, continued rate cuts could begin to drive down mortgage rates which have remained stubbornly high. This may help motivate more potential home buyers who have been holding off due to relatively high mortgage rates. It also could begin to stimulate the refinance market, in particular among those borrowers who have taken out a mortgage recently with a higher interest rate. Similar movement could also potentially be seen in the auto refinance market in the months to come.”

MICHAEL ROSEN, MANAGING PARTNER AND CIO, ANGELES INVESTMENTS, SANTA MONICA, CA

“The Fed action today, a 25-basis point cut in the Fed funds rate, was fully expected by the market. The Fed removed language on making progress on inflation, replacing it with the observation that inflation remains elevated. This cautionary note has caused Treasuries to sell-off a bit.

“The reality is that inflation remains above target, the economy is humming above trend, and the Fed will have to moderate its easing program. The market is adjusting to this more measured pace of easing by pushing yields higher.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“In an action-packed week, the Fed didn’t add any drama. Cutting by 25 basis points still keeps the federal funds rate restrictive, but not as restrictive as it was. Although the Fed says the risks to its employment and inflation goals are roughly in balance, they probably should have italicized “roughly.” Elections have consequences and we could see a marginal improvement in growth relative to their forecasts, but also a marginal increase in inflation relative to their forecasts. That would call for a more gradual pace of rate reductions. They don’t need to backtrack on rate cuts, but they don’t need to hurry up with them either.”

RYAN DETRICK, CHIEF MARKET STRATEGIST, CARSON GROUP, OMAHA

“The Fed didn’t rock the boat it was widely assumed they would cut by 25 basis points, which they did. It was nice to see a unanimous decision.”

“The big question now is will they cut again in December? Our best guess is they do, as inflation continues to improve.”

“It’s nice that they are recognizing some improvements in the U.S. economy. At the same time there are risks to a potentially slowing labor market, which in our opinion, leaves the door wide open to another cut in December at the next meeting.”

HELEN GIVEN, ASSOCIATE DIRECTOR OF TRADING, MONEX USA, WASHINGTON D.C.

“Overall, a very cautious decision that doesn’t give us much to go on when looking ahead to December. Powell may give more concrete clues in his presser but I’m expecting we’ll hear about “data dependence” a lot.”

(Compiled by the Global Finance & Markets Breaking News team)