The U.S. Federal Reserve is widely expected to lower interest rates in America by 25-basis points at the conclusion of its latest policy meeting today (Nov. 7).
Futures markets are betting nearly 100% that the U.S. central bank will lower its benchmark fed funds rate by a quarter of a percentage point after delivering a larger 50-basis point cut in September of this year.
The fed funds rate, which determines what banks charge each other for overnight lending, is currently in a range of 4.75% to 5%.
The Federal Reserve is widely expected to lower interest rates further as the U.S. inflation rate has declined to 2.4% from a peak of more than 9% in 2022.
Inflation in the U.S. is now close the central bank’s 2% annualized target, giving it leeway to reduce interest rates.
As is always the case, analysts, economists and journalists will be parsing the Federal Reserve’s accompanying statement and comments from Chair Jerome Powell for clues to future decisions by the central bank.
Currently, markets are pricing in another 25-basis point interest rate cut in December of this year followed by multiple rate cuts in 2025.
Futures traders expect the benchmark fed funds rate to be in a target range of 3.75% to 4% by the end of 2025.
Chair Powell is likely to be asked about the Federal Reserve’s reductions in its bond holdings, which have declined by nearly $2 trillion U.S. since June 2022.
Wall Street expects the reduction in bond holdings to end in early 2025.
