Monetary policy

The Federal Reserve began cutting rates in September. The December meeting is its last of 2024. Will the cutting continue, or will there be a pause? Doug Peta, Chief Strategist, U.S. Investment Strategy, at BCA Research, discusses the meeting and future policy.

The Federal Open Market Committee is expected to cut interest rates at its September meeting, which will also provide a new Summary of Economic Projections. Marvin Loh, senior macro strategist at State Street Global Markets, examine the meeting, the SEP and Fed Chair Powell's press conference.

Federal Reserve chair Jerome Powell flagged a recent upward revision to income and savings data as a sign of economic strength. He said the information could factor into the central bank's monetary policy discourse during the Fed's next interest rate meeting in November.

After cutting rates 50 basis points in September, the Federal Open Market Committee meets after Election Day to determine monetary policy. Gary Pzegeo, head of fixed income at CIBC Private Wealth U.S., provides his take on the latest move.

This week, Federal Reserve Gov. Michelle Bowman cast the first dissenting vote at an FOMC meeting in years. On Friday, she explained why the economic data she's seen didn't convince her of the need to cut rates as much as her fellow governors thought.

Given the Fed's reluctance to "surprise markets or take actions that could be perceived as overtly political," Interactive Brokers Chief Strategist Steve Sosnick said, "we find it hard to believe that anything other than 25 bp is the likely outcome for the upcoming FOMC meeting."

"The numbers are weak, but not cusp of recession weak," Chris Low, chief economist at FHN Financial, said.

The Federal Reserve's preferred measure of inflation held steady at 2.6% for the third month in a row, a positive reading that increases the odds of a September rate cut.

"Fed watchers will be parsing Powell's comments for signs that a 50bp rate cut is on the table for September," noted Lauren Saidel-Baker, an economist with ITR Economics. "However, the notoriously tight-lipped chair is unlikely to confirm this, making a 25bp cut the most likely outcome."

Gary Quinzel, vice president of portfolio consulting at Wealth Enhancement Group, gives his views about monetary policy and offers his opinion on the FOMC statement and Fed Chair Jerome Powell's press conference.

Economists expect the FOMC to hold rates, although some say there's a case to be made for a July cut, with Fed Chair Powell setting the table for September.

The Federal Reserve chairman has two years left in his term, which he will serve regardless of who occupies the White House. Powell's term on the Fed Board of Governors expires in 2028.

The Fed chief said "more good data" is needed before interest rate targets are lowered.

The Philadelphia Fed president said there can be as few as no cuts or as many as two this year, but if his projections are accurate, one decrease would be appropriate this year.

"We need to see more evidence to convince us that inflation is well on our way back down to 2%," Federal Reserve Bank of Minneapolis President Neel Kashkari said.

"I think the risks to inflation are still on the upside," Federal Reserve Bank of Cleveland President Loretta Mester said. "I think the risk to the labor market is dual-sided."

With no change in rates expected, analysts are interested in the dot plot and Fed Chair Jerome Powell's press conference.

"The Fed is going to have to pivot — not on the basis of inflation numbers, but the basis of the real economy," Mohamed El-Erian said.

New York Fed President John Williams said the Fed "will cut rates eventually" during a fireside chat at Milken Institute's Global conference on Monday.

"The Fed is certainly not going to be overly concerned about the growth backdrop" at this week's Federal Open Market Committee meeting, said BMO Chief Economist Douglas Porter.