Federal Reserve Bank set to cut U.S. interest rates today

The Fed will likely concentrate on the present problem while keeping an eye on the future, after today’s meeting with another interest rate cut.

Financial markets are pricing in a near-certainty that the Federal Open Market Committee, the central bank’s policy-making body, would lower its benchmark borrowing cost by a quarter percentage point as it attempts to “recalibrate” policy for an economy with low inflation and a deteriorating job market.

Chair Jerome Powell and his Fed colleagues will navigate a shifting economy and the political turmoil brought on by Donald Trump’s surprising victory in the presidential election, the focus will shift to their future.

Trump frequently criticized Powell and the Fed during his first term, which lasted from 2017 to 2021 supported low interest rates.

Therefore, the market’s focus will probably shift to what Powell and the committee have to say about the future, even though the immediate action will be to stick with the current track and implement the cut, equivalent to 25 basis points.

The Fed funds rate ranges between 4.75% and 5.0%, determines what banks charge one another for overnight lending, and frequently affects consumer debt.

Market pricing predicts a further quarter-point cut in December, a halt in January, and many reductions through 2025.

The Fed Bank has reduced its holdings in Treasurys and mortgage-backed securities by around $2 trillion, since it started in June 2022. Although Wall Street expects the run-off to cease as early as 2025, Fed officials have stated that the balance sheet reduction can continue even as they lower rates.