Fed's Bold Move: What the Jumbo Rate Cut Means for the Economy and Investors

Wall Street knew a change was coming, but the Fed Chair hid the details until the end.

At its September meeting, the Fed cut short-term interest rates by 0.50%, which unsettled some who thought Fed officials would be more cautious with monetary policy this close to an election. However, the Fed, comfortable with its progress on inflation but concerned about the current pace of economic growth, made a bold, decisive statement with the jumbo cut.

Now investors are asking, “What comes next?” To help lend some insight, here are a few events that we will be watching closely in the weeks ahead:

GDP Report: The advance estimate for Q3 gross domestic product is scheduled for release on October 30. The Fed’s GDP Now estimate shows Q3 GDP at 2.9 percent, but the GDP Now number can fluctuate as more economic data comes in. The official GDP number on October 30 will show whether the Fed is on target for its soft landing.

Inflation & Jobs: The September Consumer Price Index report is set for release on October 10. We'll watch for the report to see what’s happening with consumer prices. Various employment data are released weekly, but the next key report is the JOLTS (Job Openings and Labor Turnover Survey), set for release on October 1. The Fed now appears more concerned about the jobs market than inflation, so we are watching both.

Fed’s Next Meeting: The Fed’s next scheduled two-day meeting concludes on November 7– the day after the election. The Fed’s December meeting ends on December 18. Speculators see more rate adjustments before the end of 2024, but policymakers will be watching the GDP, jobs, and inflation data to determine what’s next. Following the Fed’s September meeting, Minneapolis Fed President Neel Kashkari said he expects policymakers to dial down the pace of interest rate cuts.

Fed Chair Powell’s keyword following the September meeting was “recalibration.” He suggested that interest rates need to respond to help manage the business cycle. That’s a different message from the Fed Chair, who has spent the better part of two years discussing how to address inflation.

From the Fed’s September meeting notes, It’s clear that the Fed has decided to guide short-term interest rates lower. 

^{Any forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.}

^{AtlantaFed.org, September 20, 2024}

^{BureauOfEconomicAnalysis.gov, September 20, 2024}

^{BLS.gov, September 20, 2024}