The FED decided to cut interest rates by 25 basis points. The expectation was also for a 25 basis point cut.
The Federal Reserve is taking action to counter ongoing inflationary pressures, cutting interest rates for the first time in four years. After a half-point reduction in September, policymakers have signaled two additional, smaller cuts in 2024, with more anticipated in 2025.
Following yesterday’s post-election rally, the S&P 500 is gaining momentum, up 0.6% as investors await the Fed’s latest decision. Meanwhile, the Nasdaq continues its upward trajectory, climbing about 1.3% to another record high. Government bond yields, which initially surged after the election, are dipping slightly, with the 10-year Treasury yield down to 4.35%.
A major unknown for the Fed lies in President-elect Donald Trump’s potential approach to the central bank. During his first term, Trump frequently criticized the Fed, calling for aggressive rate cuts and referring to Chair Jerome Powell as an “enemy.” However, with the Fed already in a rate-cutting mode, it remains to be seen if these moves will align with Trump’s economic goals or if further pressure from the White House will ensue.
The Fed is unlikely to bring rates down to near-zero levels, leaving the extent of future cuts—and Trump’s reaction—uncertain. As the economic landscape shifts under the new administration, all eyes remain on the central bank’s next steps.
