As was widely expected, the U.S. Federal Reserve has lowered interest rates by 25-basis points and signaled that further monetary policy easing is likely in coming months.
The rate cut was announced at the conclusion of the U.S. central bank’s latest policy meeting.
Futures traders were betting nearly 100% that the U.S. central bank would lower its benchmark fed funds rate by a quarter of a percentage point.
The fed funds rate is now in a range of 4.50% to 4.75%.
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 9.1% in 2022.
Inflation in the U.S. is now close to the central bank’s 2% annualized target.
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.
In announcing the latest interest rate cut, Federal Reserve Chair Jerome Powell said he is feeling good about the economy and emphasized that any future interest rate decisions will be data dependent.
“Overall, we’re feeling good about economic activity,” he said.
