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On November 7, the Federal Reserve is anticipated to lower interest rates for the second time this year, following an unexpected significant cut just two months ago. Economists surveyed by FactSet predict a reduction of 0.25 percentage points, bringing the federal funds rate down to a range of 4.5% to 4.75%, from its current level of 4.75% to 5%. This decision reflects a broader strategy as the central bank adjusts its monetary policy in light of recent economic developments.
The Federal Reserve’s key inflation gauge has recently dipped to 2.1%, approaching the central bank’s target of 2%. This decline signals a shift in the Fed’s approach, as it previously imposed higher borrowing costs to combat inflation that had surged to a 40-year peak during the pandemic. Such high rates have strained consumers, making loans for homes and cars increasingly expensive.
If the Fed proceeds with the expected 0.25 percentage point rate cut, it could provide some temporary relief for consumers, although experts warn that the immediate impact might be minimal. Additional rate cuts may follow in upcoming meetings, potentially leading to greater financial savings for borrowers over time. Matt Schulz, chief credit analyst at LendingTree, highlighted that while the initial cuts may not significantly alleviate financial burdens, more reductions in the coming months could lead to substantial benefits for everyday consumers dealing with debt.
Here are key details to consider regarding the Fed’s upcoming meeting:
Will the Fed reduce interest rates?
Yes, the Fed is highly expected to cut its benchmark interest rate by 0.25 percentage points during the meeting on November 7, as per insights from economists consulted by FactSet. Gregory Daco, chief economist at EY, expressed optimism for a gradual adjustment in Fed policy, citing ongoing disinflation in price and wage growth along with robust productivity trends.
Daco also forecasts that the Fed will continue to lower rates by an additional 0.25 percentage points at subsequent meetings, potentially reaching 4.4% by December and 3.4% by June 2025.
When will the Fed announce its rate decision?
The Federal Reserve will disclose its interest rate decision at 2 p.m. ET on November 7, followed by a press conference featuring Fed Chair Jerome Powell at 2:30 p.m. The next rate decision is scheduled for December 18.
What are the projections for rates in 2024?
At the upcoming December meeting, the Fed is likely to cut its benchmark rate to a range of 4.25% to 4.5%, reflecting a total decrease of one percentage point since the high rates prior to the substantial September cut. However, it is important to note that mortgage rates and other borrowing costs may not directly align with this federal funds rate as lenders typically charge premiums above it.
Nevertheless, borrowers might find some welcome relief, as current trends show slight declines in credit card rates, which still hover near historical highs. Schulz cautioned that while consumers can expect gradual improvements, substantial reductions in monthly payments may take time to materialize.
Should consumers expect mortgage rates to fall?
Interestingly, despite the Fed’s rate cut in September, mortgage rates have actually increased over the past month, with the average 30-year fixed-rate loan now at approximately 6.72%, up from a low of 6.08% in September.
The interplay of Fed rate decisions with economic variables such as unemployment and investor sentiment continues to dictate trends in mortgage borrowing costs. Rising Treasury yields—prompted by concerns regarding U.S. debt levels and the political landscape—are also contributing factors that inhibit a drop in mortgage rates. Jacob Channel, a senior economist at LendingTree, noted that investor apprehension about economic conditions is a significant barrier to sustained reductions in mortgage rates.
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