The Federal Reserve is expected to cut interest rates by 25 basis points this week, though officials remain split and may signal no promise of further cuts, according to Jennifer Schonberger of Yahoo Finance. Inflation is still above target, and recent data is mixed, with volatile job growth and signs of labor-market softening. Some economists warn that more cuts could risk persistent inflation, while others argue that weakening employment justifies easing. Markets now await the Fed’s updated economic projections through 2026 and Chair Powell’s guidance on the path ahead. Schonberger writes:
After consternation about whether the Federal Reserve will cut interest rates for a third time this year, the consensus is that the central bank will likely go ahead with a 25-basis point cut on Wednesday — even if it’s a split decision.
“This is a hard call,” said Alan Blinder, former vice chair of the Fed and economics professor at Princeton. “[But] I do think it’s more likely they cut than not… It wouldn’t surprise me if this is a ‘hawkish cut.'”
That is to say, a rate cut this week could come with a caution to markets not to expect the Fed to keep cutting meeting after meeting. Blinder said he also thinks there could be dissenters on both sides of the interest rate decision, given existing divisions within the committee. […]
“The vice chair, John Williams, usually doesn’t strongly signal that much in a speech unless he has the Fed chair’s endorsement,” said Loretta Mester, former president of the Cleveland Federal Reserve. “So my view is they’re going to go ahead with another 25-basis point cut in December.” […]
A stronger-than-expected — albeit stale — September jobs report showed payroll growth bounced back in September with 119,000 jobs added, compared with a loss of 4,000 for the month of August. That contributed to a volatile trend where job creation turned negative in June, increased in July, decreased again in August, and rebounded again in September.
A more recent anecdotal reading on the job market from the Fed’s Beige Book showed that in the first two weeks of November, layoffs ticked up, employers were implementing hiring freezes, and adjusting workers’ hours. […]
Amir Bagherpour, global managing director for Accenture, is predicting the Fed will cut rates one or two more times next year after cutting this week. That outlook assumes inflation as measured by core PCE will range from 2.5%-2.7% next year; GDP will be in the range of 1.5-1.8%; the unemployment rate will end next year in the range of 4.4-4.6%; and monthly jobs growth will average 75,000-125,000.
Fed officials will release new projections for inflation, GDP, and unemployment on Wednesday.
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