The Fed cut its benchmark interest rate by 25 basis points to a target range of 4.50-4.75% at its November meeting, noting that inflation had “made progress” toward its goals.
FOMC policy details:
- The target federal funds rate was lowered by 0.25% to a range of 4.50-4.75%.
- Adjusting the interest rate on reserve balances to 4.65%
- Overnight reverse repo rate up to 4.55%
- Continue the $25 billion monthly cap on Treasury securities and $35 billion on agency/MPS debt
In their official statement, policymakers acknowledged the “strong” economic expansion while noting improving labor market conditions. They also noted that risks to employment and inflation targets are “roughly balanced,” so future interest rate decisions will depend on careful evaluation of incoming data and evolving expectations.
Link to FOMC Official Statement (November 2024)
Notably, the Fed removed the phrase “the Committee has gained greater confidence that inflation is moving sustainably toward 2 percent” and the reference to “in light of progress on inflation” compared to the September statement.
When asked about these changes during the press conference and whether it was implied or not “December pause” Federal Reserve Chairman Jerome Powell responded cautiously:
“Not really, no… We don’t think this is the right time to do a lot of forward guidance. There’s a fair amount of uncertainty. We’re on our way to our destination but we don’t know the exact destination and pace.”
As for US election results and their potential impact on Federal Reserve policy“Powell stated “In the near term, the elections will have no impact. We do not know what the timing and effects of the policy changes will be. We are not guessing, speculating or assuming.”
Link to FOMC press conference (November 2024)
Market reactions
US dollar against major currencies: 5 minutes
Overlay of the US dollar against major currencies Chart by TradingView
The US dollar showed mixed reactions following this announcement. Initial volatility emerged after the FOMC statement, with further price swings during Chairman Powell’s press conference.
Initial reaction to the actual statement was generally bullish, with the US currency rising sharply before retreating ahead of the conference, which then led to a slight decline across the board.
The dollar then rallied back to intraday highs after the FOMC meeting against most of its counterparts, followed by a pullback and greater consolidation for the rest of the session.
By the end of US market hours, the dollar was stronger against the New Zealand Dollar (+0.28%) and the Australian Dollar (+0.21%) while modest gains were seen against the Euro (+0.19%) and the British Pound (+0.15%). There were slight changes against the Japanese Yen (+0.03%) and the Canadian Dollar (+0.04%).