Federal Reserve September interest rate decision: 50 basis point cut

September 18, 2024 at 07:00PM

Bowman dissents in 11-1 vote

No change to QE, as expected

Economists widely expected a 25 bps cut

Fed funds futures priced the likelihood of 50 bps at 59%

Fed funds were in range of 5.25% to 5.50% before the decision

Now says: The Committee has gained greater confidence that inflation is moving
sustainably toward 2 percent, and judges that the risks to achieving its
employment and inflation goals are roughly in balance.

Repeats that economic activity had continued to
expand at a solid pace

Says job gains have slowed

Prior statement said job gains had moderated

Says inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.

Prior statement said inflation had eased over the past
year but remains somewhat elevated

USD/JPY was trading at 142.02 just before the decision and US 2s were trading at 3.64%. For Sept-2025, the market was in 237 bps of easing before the decision, including 114 by the end of 2024.

Highlights of the Summary of Economic Projections:

Median at 4.4% this year vs 5.1% prior

Median at 3.4% vs 4.1% prior Fed funds rate for end-2025

Median at 2.9% vs 3.1% at end-2026

Median view of longer-term Fed funds at 2.9% vs 2.8% prior

2024 GDP growth median +2.0% vs +2.1% prior

2025 GDP 2.0% vs +2.0% prior

Unemployment rate in 2024 4.4% vs 4.0% prior

Unemployment rate in 2025 4.4% vs 4.2% prior

2024 PCE inflation 2.3% vs 2.6% prior

2025 PCE inflation 2.1% vs 2.3% prior

2024 core PCE 2.6% vs 2.8% prior

2025 core PCE 2.2% vs 2.3% prior

This article was written by Adam Button at www.forexlive.com.

Federal Reserve September interest rate decision: 50 basis point cut