Fed Rate Cut 2024 – What to Expect From The Federal Reserve Meeting?

Sep 17, 2024

Fed Rate cut 2024

The wait and speculations for the Fed interest rate news are almost over as eyes turn to the Federal Reserve meeting on Wednesday, the 18th.

Economists expect a Federal Reserve rate cut for the first time in over two years. Earlier this year, the market called for a minimum 0.5% reduction in borrowing rates. However, the changing economic indicators suggest the committee is not rushing to make such a giant leap.

The speculations are over the roof, and traders hold on to their investments to make the most of news trading. So, how will the Fed rate cut 2024 news unfold? Let’s find out.

What Do We Know About The Next Fed Meeting 2024?

The Federal Open Market Committee (FOMC) has eight scheduled meetings around the year. During those meetings, they discuss national economic and financial conditions, evaluate ongoing short and long-term plans, and make decisions that reflect the people’s interests.

This time, the Fed Rate cut 2024 expectations in September’s meeting is taking over the market, with experts and analysts debating on the necessity to lower interest rates.

Earlier this year, it was decided that interest rate Fed cuts would happen if the inflation rate fell to a target 2% level. The board said that the Fed cutting interest rates will exacerbate the local economy if the consumer price index and inflation metrics do not drop.

Expected Fed Rate Cut 2024

These speculations are not new, as investors and corporations have called to lower the unchanging interest rate in 2024, which has been 5.5% since July 2023. 

In fact, if the decrease happens, it will be the first time since March 2020, when the borrowing rate hit a rock bottom of 0.25%.

Experts were speculating on 0.5% Fed cuts in interest rates to spur economic growth and avoid recession. However, the FOMC evaluates that such a double-down decrement can worsen inflation rates.

Therefore, a single 0.25% drop in interest rates is more likely to happen in the upcoming Federal Reserve meeting on 17-18 September.

Why is a Rates Cut Necessary?

Dropping the interest rate means companies can take loans at a lower cost, and commercial banks enjoy more favoured conditions when requesting and issuing credits. Such decisions will motivate more businesses to invest and grow, boosting the economy.

However, the Fed needs to balance these rates with key economic indicators like inflation and unemployment, which have been challenging in the last few months.

US Inflation and Economic Indicators

Despite the recovering US inflation rate, falling from 3.1% to 2.5% YTD, the Federal Committee still regards it as far from the target percentage. On the other hand, experts consider it a massive improvement compared to 3.7% in September last year.

Therefore, from this perspective, inflation metrics are somehow good, and the Federal Reserve rate cut can be tolerated.

However, the unemployment rate is challenging because of the noticeable increase since the beginning of this year. After reaching as low as 3.7% last year and January 2024, this figure started climbing every month, reaching 4.2% in August reports.

This happens because a drop in inflation rates means slower economic growth, which can lead to lower demand for labour. Therefore, the Fed is now more concerned with fixing the unemployment rate than lowering the interest rate.

Some argue the way to help unemployment levels recover is by cutting the Fed rate, which will encourage businesses to increase their production and investments and demand more labour.

Conclusion

The FOMC meeting is highly awaited by market experts, corporations, and traders, who predict an interest rate cut will be announced. 

However, the worsening employment situation can affect the board’s decision, which can either take tentative interest cuts or leave it as it is and focus on the unemployment metric.

If done, the Fed Rate cut in 2024 will be historical, considering it to be the first decrease in years.

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