As widely expected, the FOMC lowered by the fed funds target range by 25 basis points to 4.25-4.50 percent. The statement issued with the decision is little changed. There are no alterations to the economic assessment with activity at a"solid pace", labor market conditions"generally eased", and an unemployment rate that"remains low". Disinflation has"made progress" while inflation"remains somewhat elevated".

The only change in the language is an expansion regarding the outlook for rates. The statement added"the extent and timing of" to the prior formulation which now reads in full,"In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent. In considering the extent and timing of 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.

The meeting vote was not unanimous. Cleveland Fed President Beth Hammack would have preferred no change in rates. While 11-1 vote indicates this is a minority, it does suggest that at least some participants are concerned that disinflation is stalled.

The summary of economic projections shows that the median FOMC forecast for the fed funds target rate is a midpoint of 3.9 percent in 2025, up from 3.4 percent in the prior forecast. This implies two 25-basis point rate cuts for 2025, fewer than previously expected. For 2026, it is 3.5 percent and 3.1 percent in 2027. The longer-run forecast is revised up a tenth to 3.0 percent.

The forecast for GDP ends 2024 slightly higher at up 2.5 percent, revised higher from 2.0 percent in the September forecasts, with little change in the out year expectations. The 2024 forecast for the unemployment rate is 4.2 percent at year-end, slightly lower than previously expected. The PCE deflator is expected to end 2024 at 2.4 percent, up a tenth from the previous forecast and the core PCE deflator is seen at up 2.8 percent when 2024 closes, up four-tenths from the prior forecast.

Overall, the FOMC sees growth once again stronger than anticipated, unemployment remaining low and consistent with modest expansion, and inflation improving but not enough to ease monetary policy at anything other than a cautious pace.

Markets and forecasters almost uniformly expect a 25 basis point rate cut as US authorities view policy as overly restrictive given a slowing employment market.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.