The Federal Reserve appears ready to implement a quarter-point reduction in its benchmark policy rate next week, maintaining its strategic direction despite a skewed employment report and clouded economic policy outlook surrounding the upcoming US presidential election.
The Federal Open Market Committee’s next interest rate decision will be announced two days after the polls close, potentially before final election results are known. The anticipated quarter-point cut would establish a new target range of 4.5-4.75 per cent for the federal funds rate, marking a return to more conventional easing measures following September’s larger half-point reduction.
Former Boston Fed president Eric Rosengren emphasises the logic behind this move, noting the currently high real federal funds rate and the desire to avoid excessive economic slowdown. The decision is bolstered by evidence of robust US economic growth, supported by a healthy labour market and sustained consumer spending, even as inflation shows signs of moderation.
The October jobs report presented a notable concern, showing only 12,000 new payroll gains – the lowest during Joe Biden’s presidency. However, these figures were significantly influenced by two hurricanes affecting the US south-east and worker strikes, including an ongoing dispute at Boeing, which accounted for 44,000 job losses.
James Bullard, former St Louis Fed president, observes that recession fears have largely dissipated, supporting a measured approach to future rate reductions. The central challenge for officials lies in determining the pace at which to achieve a neutral interest rate level – one that neither inhibits nor stimulates growth while ensuring inflation returns to the 2 per cent target.
The upcoming US presidential election adds complexity to the Fed’s decision-making process. Both candidates present contrasting economic platforms that could significantly impact growth and inflation trajectories. The implementation and effectiveness of these policies will largely depend on the distribution of power in Congress, prompting Fed Chair Jay Powell to likely maintain a cautious stance regarding future policy guidance.
Post Disclaimer
The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.
This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.
The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.