The Federal Reserve’s meeting on September 18, 2024, is one of the most anticipated in recent years. The key focus is on whether the central bank will cut interest rates for the first time since 2020, and by how much. The two-day meeting concludes today, and Fed Chair Jerome Powell is expected to announce the decision at 2 p.m. Eastern Time, followed by a press conference.
There is widespread speculation that the Fed will reduce rates by either 25 or 50 basis points (0.25% or 0.5%). While inflation has significantly cooled, with the latest Consumer Price Index (CPI) showing inflation at a three-year low, some areas like housing remain stubbornly high. Economic indicators suggest that the Fed has room to cut rates without jeopardizing its dual mandate of stable inflation and full employment. The unemployment rate, currently at 4.2%, is still relatively low but slightly higher than its peak in 2023(
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LiveMint).
If the Fed opts for a larger 50 bps cut, it might signal deeper concerns about the economy’s strength, potentially sparking market volatility. On the other hand, a more modest 25 bps cut could provide a gradual easing while maintaining flexibility for future policy adjustments(
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UPI).
The outcome of this meeting is crucial, not only for the U.S. economy but also for global markets, as investors closely watch how the Fed navigates the balance between inflation control and supporting growth.