In a surprise to no one, Fed cuts rates by 25bps

Odds of a second 25bps cut in December are now at 66%, according to CME Group

November 7, 2024 04:00 pm

Fed interest rate cut

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

The FOMC today, as expected, lowered interest rates by 25 basis points. Committee members cited a commitment to “achieving maximum employment” and a 2% inflation target as reasons for the decision.

Odds of a second 25bps cut in December are now at 66%, according to CME Group’s federal funds futures markets data.

The FOMC’s forward guidance (see what we did there) from this week’s meeting remained unchanged, indicating committee members likely are confident that interest rates will end 2024 another 25bps lower.

“In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook and the balance of risks,” today’s statement read.

It’s the same crucial sentence we’ve seen before, which shouldn’t shock markets. And, as a result of no surprises, stocks should see at least a mild extension of their Trump-fueled rally, according to Sevens Report Research founder Tom Essaye.

“Given yesterday’s strong rally, I’d expect some digestion of the move or a mild drift higher,” Essaye said. “However, this outcome should keep expectations for a rally into year-end in place, led by cyclical sectors — industrials, financials, small caps [and] energy — with tech and defensives lagging.”

The S&P 500 was up 0.6% over today’s session in the moments after the Fed’s decision, while the tech-heavy Nasdaq Composite had gained 1.3% just after 2 pm ET.

Get the news in your inbox. Explore Blockworks newsletters: