WASHINGTON–The Federal Open Market Committee (FOMC) will begin two days of meetings today, with most analysts expecting a rate cut to be announced when the meeting concludes on Wednesday.
Among those saying he expects the FOMC will reduce rates has been NAFCU’s chief economist, Curt Long, who believes economic data indicate the Fed will move to cut rates by 25 basis points to a target range between 1.50% to 1.75%. If it does so, it would be the Fed’s third rate cut in a year in which many economists had predicted the Fed would slowly lift rates to rein in the economy.
What many analysts will be watching is whether Federal Reserve Chairman Jerome Powell signals the Fed is at the end of the easing cycle or if there is the possibility of additional rate reductions.
Bloomberg Analysis
“The Federal Reserve will not take any chances this week by defying market expectations for additional accommodation -- we expect the central bank to deliver a third consecutive rate cut at the FOMC meeting,” said economists with Bloomberg. “Had policy makers held strong reservations against the anticipated move, Fed Chair Jerome Powell and Vice Chair Richard Clarida would have pushed back against it in remarks prior to the blackout period; they chose not to.”
President Trump has been calling on the Fed to cut rates further, saying it would be “derelict in its duties” if it doesn’t do so.
As CUToday.info reported earlier, minutes released following the FOMC’s most recent meeting indicate a divide on how aggressively the Fed should move, or whether it should move at all.
Most analysts expect GDP data to be released this week to also show the economy continues to slow down.
Capital Economics Analysis
“With the markets still fully pricing in another 25bp rate cut at next week’s FOMC meeting and officials doing nothing to push back against those expectations, there is little point trying to deny that reality,” Capital Economics said last week in its analysis. “Although we had previously suspected that the Fed would opt to leave rates unchanged next week, we now anticipate two more 25bp rate cuts this year – one next week and one in December.
“While progress towards an agreement reduces the risks of future tariffs being introduced, it has not yet reversed any of the tariffs already in place, the latest wave of which have yet to fully feed through to economic activity and inflation,” the firm continued in its analysis. “Fed officials are also concerned about the impact of trade uncertainty on business investment, which remains elevated.”
Key economic data on the U.S. labor market and the manufacturing sector are set to be released on Friday.