The Federal Reserve is set to cut interest rates again on Thursday, marking a key adjustment as inflation cools and the job market moderates.
Markets expect a quarter-point reduction in the benchmark rate, which currently ranges between 4.75% and 5.0%.
This shift aims to “recalibrate” policy for a changing economy while supporting growth, CNBC reported.
Attention will likely center on what Fed Chair Jerome Powell says about future rate cuts.
The Federal Open Market Committee has avoided speculating on policy changes after a recent presidential election, but Powell may address potential impacts. Economists expect Trump’s anticipated tax cuts and spending policies to challenge the Fed’s approach, potentially reviving inflation concerns.
Investors are watching whether the Fed can maintain low inflation while gradually reducing rates. Many anticipate a “terminal rate,” the ultimate goal of this rate-cut cycle, though Powell will likely outline a cautious path forward. Speculations about rate cuts through 2025 highlight the central bank’s economic uncertainty.
Beyond rate cuts, the Fed’s effort to shrink its balance sheet by selling assets like Treasury bonds continues. Although officials see no immediate need to adjust this pace, the process could pause if economic conditions warrant.
While Thursday’s decision is significant, traders expect additional rate cuts by year-end. Investors are watching closely to gauge the Fed’s direction in balancing inflation control and economic growth.
This article was written with the assistance of artificial intelligence.