Today, the Federal Reserve is scheduled to deliver its third consecutive interest rate cut at the final meeting of the year.
Following a period of indecision, markets have settled on a quarter percentage point cut. If that’s the case, the Fed’s key interest rate will drop to a range of 3.5%-3.75%.
Several arguments support a rate cut, including slow job growth that lags behind labor supply and an increasing unemployment rate. A Bureau of Labor Statistics report Tuesday indicated that job openings were mostly unchanged in October, but hiring decreased by 218,000 and layoffs rose by 73,000.
However, other indicators of labor market tightness and some alternative data measures of layoffs have recently increased, introducing a new and potentially more serious downside risk.
Besides the rate decision and statement, investors will monitor an update to the “dot plot” showing individual officials’ rate expectations. They will also watch projections for gross domestic product, unemployment, and inflation, along with a potential update on the Fed’s asset purchase plans, as some anticipate the committee may shift from stopping the runoff of maturing bond proceeds to resuming purchases.
Leading into the meeting, ET futures tied to the Dow and the S&P 500 are roughly 0.1% higher, while Nasdaq futures are 0.25% lower.
President Trump has reportedly begun interviews with candidates to replace Jerome Powell as the next Federal Reserve chair, starting with former Fed Governor Kevin Warsh today.
Trump has five finalists on his list, including National Economic Council director Kevin Hassett, who is considered the frontrunner.
By CEO NA Editorial Staff
