Fed meeting November 2024: A unanimous quarter-point cut

As expected, the Federal Reserve (Fed) unanimously decided to cut rates by a quarter point. This suggests the Fed is comfortable with the level of inflation and believes risks to its employment and inflation objectives are balanced.

We are now at 75 basis points in cuts this easing cycle. This is equivalent to the total amount of cuts in the 1995-1996 easing cycle. And in my opinion, there’s far more to go for the Fed this time around, which bodes well for risk assets.

What could cause a pause?

Fed Chair Jay Powell was asked why the Fed didn’t pause this meeting, and he pointed to the significant progress made on inflation. He noted that the one exception — housing services prices — didn’t reflect current inflationary pressures but rather past inflationary pressures.

Powell explained the Fed is continuing to cut because it believes monetary policy is still restrictive. In addition, he said the labor market has cooled in the last two years and is still softening, and the Fed doesn’t want to see further cooling.

Bottom line: The job is not done on inflation, but the Fed needs to continue to recalibrate policy — hence today’s decision.

When asked about what data would cause the Fed to pause in December, Powell wasn’t specific. It’s clear it will be based on a totality of the data as the Fed is now focused on both its mandates.

Powell was asked if he’s concerned about inflation expectations becoming unanchored. He said he doesn’t believe they are, but the Fed would of course act quickly if that were to happen.

Potential Trump policies won’t impact near-term Fed policy

As I expected, the Fed was clear that it would not preemptively adjust monetary policy to account for policies from the incoming Trump administration that could amplify both growth and inflation. He pointed out that we don’t know the timing and substance of any upcoming policy changes and won’t “guess, speculate or assume” what economic impacts could be.

Trump’s policies could have effects on the economy over time, Powell acknowledged, so forecasts of those effects would be included in the Fed’s model and taken into account through that channel. But that won’t impact Fed policy in the near term.

Powell’s term as Fed Chair expires in 2026. He was emphatic that he will not resign if asked by the new president, suggesting continuity for the Fed in the next several years.

Conclusion

The main point of Powell’s press conference is that the Fed thus far appears satisfied with progress made and is confident in its ability to recalibrate policy in response to the data going forward. This includes the possibility of a pause in December, and even a hike in 2025 (although that is definitely not the plan and would be very unlikely).