United States: Central Bank decides to decrease rates again in November
Latest bank decision: At its meeting on 7 November, the Central Bank decided to lower the target range for the federal funds rate by 0.25 percentage points to 4.50–4-75%. This took total rate cuts this year to 0.75 percentage points.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision were the fact that inflation has fallen persistently in recent months towards the Fed’s 2.0% target range, plus the general easing of labor market conditions including a slight increase in the unemployment rate.
Policy outlook: The Central Bank is likely to continue cutting rates going forward, though the pace and extent of easing could be significantly affected by the new Trump administration’s trade and fiscal policy. If Trump cuts taxes and/or hikes tariffs, as he has pledged to do, this would put upward pressure on inflation and could cause the Fed to slow or pause rate cuts. On the flipside, there is the outside chance that Trump tries to reduce the political independence of the Fed, which could lead to faster-than-expected rate cuts.
Panelist insight: Giving their take on the outlook, Nomura analysts said:
“We continue to expect 25bp rate cuts in December and March, with a skip in January. We anticipate tariff-driven inflation by mid-2025 will lead to a prolonged pause in the Fed’s easing cycle.”
United Overseas Bank’s Alvin Liew said:
“For now, we still expect one more 25-bps cut for the Dec 24 FOMC to bring rates to 4.25%-4.50% by end-2024, followed by 100 bps of cuts in 2025 (one 25-bps cuts per quarter) with one final 25-bps rate cut to bring us to the terminal rate of 3.25% by 1Q 2026.”